How Uniswap Will Impact Hive-Engine Trading
Hive-Engine is a very niche and low volume exchange. Right now, you have to have a Hive account to trade on the exchange, which makes it inaccessible to the vast majority of crypto traders out there.
When wLEO goes live, you’ll be able to trade LEO on an external exchange with high volume for the first time ever. The impacts of this are something that we continually discuss in each roundtable podcast leading up to the official launch of Wrapped LEO.
One of the major impacts will be on the opportunities to trade LEO on Hive-Engine. You’re seeing some of this play out already as hype for the launch of wLEO ramps up and trading volume sees all-time highs.
As a trader, you want high trading volume, high liquidity and high volatility. Volume and liquidity allow you to get in and out of positions without a high degree of slippage. High volatility allows you to see price swing up and down enough to capture ROI opportunities.
LEO has high volatility - the price often swings 10% or more each day - but it has a lack of liquidity and volume because of the niche nature of the Hive-Engine exchange. There are simply too few traders to bring the type of liquidity and volume necessary to make it a highly traded asset by a wide audience.
On Uniswap, the liquidity pool will be orders of magnitude deeper than the liquidity on Hive-Engine. This means that buying and selling wLEO on Uniswap will result in less slippage as compared to Hive-Engine.
Since wLEO->LEO can be instantaneously swapped back and forth between ETH and Hive, what happens on Uniswap is not isolated from what happens on Hive-Engine.
For example, if the price of wLEO 10x’s on Uniswap but hasn’t yet caught up in price on the Hive-Engine order books (since they’re priced independently), then someone who has a Hive account can buy LEO on Hive-Engine at a cheaper price than someone could buy wLEO on Uniswap.
Then this trader can wrap the LEO they just purchased at a cheaper price onto the Ethereum blockchain and sell it on Uniswap at a premium. This is called exchange arbitrage and is one of the most common forms of trading on the planet. Up until now, there were no opportunities to exchange arbitrage LEO (since it’s only been traded on 1 exchange).
When wLEO launches on Uniswap this coming week, there will be 2 exchanges where you can trade and the number of opportunities to buy and sell LEO for a profit will rise exponentially. In this clip, Neal also mentions that the depth of liquidity on Uniswap will vastly outweigh the depth of liquidity on Hive-Engine, which will also lead to interesting exchange dynamics between the two.
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