The current funding limit of the pair is at $50k BNT at the moment, we would like to increase the liquidity by 100% or an additional $50k BNT to compensate for the change in the token price of BNT since our original proposal passed.
minting BNT for coinvestment is fine as a concept, but minting it to compensate for price changes is not imo, and here’s why:
if the amount of BNT on the curve has decreased due to the price changes, that means that BNT that was minted back then was released from this curve and moved to other curves
if we mint more BNT and the price moves again, we will be releasing more newly BNT into circulation
this minting would put downwards pressure on BNT price, which even without ILP and even if you don’t care about BNT price, hurts other tokens on the protocol
this is because as TKN price decreases (e.g. ACRE in this case) the people selling that TKN into the TKN/BNT pool, unless they hodl the BNT they pulled out, are swapping it for some other TKN, which increases the deficit “somewhere else”
it is safest and reasonable to mint more BNT for coinvestment for tokens that behave most similar to BNT in price and already have high volume, i.e. similar to the crypto market overall. Minting more BNT for some TKN each time its price drops to try to maintain some external liquidity peg (e.g. $X) is dangerous for both the protocol and for TKN LPs. Minting more BNT to increase liq on a low volume token on the promise of future volume “due to slippage” is dangerous (e.g. LINK).
As I understand, that strategy would cause deficits elsewhere across the protocol as TKN price goes down, but also if the price reverses, lock in a large deficit for TKN on the way back up as it would be mooning relative to a larger amount of BNT that was minted somewhere near its local bottom. Or to say it another way, the TKN “IL” breakeven point would be a number much closer to its post-dump price.
This is something that @mikewcasale would know how to simulate to confirm/reject what I’m saying.
7d trading volume is $28
unless these fees are demonstrably significantly higher on other AMMs (e.g. 100x+)
increasing liquidity won’t drastically increase the bancor volume because
high volatility moments are typically when we see (in data for tokens that naturally attract volume) high fees regardless of the liquidity
slippage is generally a concept that is most relevant to low-volatility, high-volume times because by definition the trades themselves are happening in a tight price range, so the slippage has to be less than that range, when prices are trending then the slippage isn’t particularly relevant
if we expect large price changes then that’s when we should be taking liq off curve, only putting it back on when things calm down
it’s not possible on a constant product curve to have fees offset IL during a clear price trend, and adding liquidity only makes that worse
@mikewcasale is indeed working on showing how price trends and liq interact in the simulator
you can read about it here Proposal: Limit on-curve liquidity to max(520 x 7 day fees, 100k BNT) - #44 by thedavidmeister