PulseX BUY & BURN | Its Potential Effects on Price.
Pulse X
PulseX Is the Decentralized Exchange that will be the most liquid(has the most tokens available to swap) and have the cheapest fees on the soon to be released Pulsechain network.
It has a built in fee of 0.29% per transaction, with around 76% going to Liquidity providers, 3% going to an address you should have no expectations of(some sort of anonymous Dev associated Wallet) and 21% is used to Buy and then Burn PLSX from that 0.29% fee.
PLSX is the native token to PulseX, which allows users to vote in a DAO(Decentralized Autonomous Organization) on the reward tokens that will end up in PLSX staking pools at a minimum.
Once Pulsechain is launched, PLSX will never have any more tokens than it began with, making it Deflationary due to the Buy and Burn Function; Once coins go through the Buy and Burn function, they are permanently removed from supply. The Buy and Burn, a function anyone can initiate, buys PLSX(acting like someone making a purchase in the way it would effect price) and then permanently removing the tokens from supply.
Let’s analyze what that could mean for price.
Price of Pulse x??
First let’s take a moment to understand how price appreciates on a token.
Price depends on the amount of a given token in a liquidity pool in comparison to what its trading pair is.
Think of it like this, in order for you to exchange token X for any other token, someone must have created a”pool” with an equal $ value of the token you have and the token you want.
As more people do what you did and exchange token X for this other token, you are increasing the amount of tokens in one side of the pool and decreasing the other side. This would mean that the side with the decreasing amount of tokens will see an increasing in $ value, while the other side will be decreasing in $ value.
Its important to have a general understanding of this for what we are about to talk about.
So to be clear, the ratio of one side of a Liquidity pool to another, determines price appreciation or depreciation for given digital assets. There are a few more factors, however that is outside of the scope of this Blog.
So why is this important for PLSX?
When it comes to PLSX and the Buy and Burn, 21% of each fee is used to purchase PulseX from liquidity and permanently burn it. Because this function is buying from a Liquidity pool, it is acting as someone buying PLSX in large amounts every time someone triggers the function.
Lets look at some rough math to see what that might look like daily.
Daily buy pressure
Currently, Uniswap is Ethereum’s major decentralized exchange and gets around $1-2 Billion in daily volume exchanged in the protocol.
Let’s use a conservative estimate of what PulseX might get at $1.2 Billion in daily volume on average over the course of one year.
21% of .29% is roughly .06% of each fee going towards they buy and burn. The equation we would us to figure out how much would go towards buying PLSX in the function is this: 1,200,000,000(daily volume)x.0006(0.06%)=720,000.
Every single day, $720,000 would be bought up from the “buy” part of the buy and burn, which will act like large purchases throughout the day on PLSX. In the beginning, if PLSX price is $0.0005, then approximately 1,440,000,000 tokens would be burned in a 24 hour period with daily volume of 1.2 Billion. This can quickly change due to price appreciation however.
If price appreciates to $0.005, that same $720,000 will only buy 144,000,000 tokens now. If price were to appreciate to $0.05, now only 14,400,000 tokens are purchased. And in a completely hyperbolic and hypothetical scenario where the price of PLSX is $2.50, that same $720,000 only buys 288,000 Tokens.
So what does that mean for price long term?
In the Early months, this is likely to create massive upward pressure on price and slowly taper off as time goes on due to it taking more and more money to buy the same number of tokens over time.
If you look at how much the price of Hex(a cryptocurrency made by the same founder as PulseX which lives on Ethereum) moves from a $300,000 buy at around or $0.11 range, it moves the price somewhere around the 5% ISH mark tops(Very Roughly).
As time goes on however, this same buy pressure could act more like a Hedge against sellers more so than simply placing high pressure on the price movement.
Lets look at a graph that is NOT TO DO WITH PRICE, but with how I see the “Buy” feature placing upward pressure on price over time.
Buy pressure impact
When PulseX first begins, the amount of buy pressure will have its highest impact due to the price per token being its cheapest.
Over time, it will provide less and less upward pressure to the price as the price of PLSX increases.
Again this does not account for what price will do, as volatility is imminent as people sell to extract any gains they wish to cash out on, nor does it account for fluctuations in Volume. This is just how I see the buy pressure’s impact over time in a VERY general sense.
Here’s where things get interesting
Now that we’ve talked about the “Buy” in Buy and Burn, how could the Burn feature affect price? The Burn feature is unlikely to have any effect on upward pressure for some time.
In the early days, the amount of PLSX that is being burnt will be a very small percentage of supply. Over the course of one year, if price starts at $0.0005 and ends at $0.005, assuming it went up fairly consistently, the average price would be somewhere around $0.00275. So if we average out how much PLSX would be removed in that year, we would have burned through roughly 105,120,000,000 tokens, which is slightly less than 1% of the total supply(Total supply will be around 13 Trillion).
Let’s assume there is another 10x growth in the following year from $0.005 to $0.05, giving us an average price of $0.0275 over the year. Now we have removed 9,556,363,636 tokens from supply, which is .07% of supply roughly.
After 2 years of 10x growth, we have still only burned about 1% of the total supply.
So how will this impact the upward pressure on PLSX?
Inverted graph
Again this is only how I see it impacting pressure on price over time not price directly.
In the initial number of years, It most likely will have a very low impact on upward pressure of price. This will add up over a long period of time as PLSX becomes more and more scarce, meaning less and less PLSX will be able to make it into Liquidity pools.
I believe this is especially the case due to PLSX single sided staking pools being a potential driving force in limiting the amount of PLSX on the market in general, because people can sell other tokens they earn instead of their golden goose: PLSX.
Assuming this is all true, It may take a number of years for PLSX to see the effects of Deflation, however it will act as a compensatory pressure to the “Buy” function as the Buy functions ability to create upward pressure over time decreases.
Conclusion
So all in all, it seems like not only does PLSX want to drive itself upward in its early years, but when that mechanisms impact tapers off the Deflation will slowly start to effect the price in a compensatory manor over a longer span of time. What this does not account for is anything to do with price, this is merely pressure applied to price movement over time. All of these numbers are estimations just to show in an EXTREMELY rough fashion how this may all work.
The price could go up faster or slower, the volume could be higher or lower on PulseX, Sellers could dominate the market for different periods of time, etc.. So all that this blog is showing is how the Buy and Burn creates short term and long term pressure on the upward movement of price and how unique it truly is for a token.
It is one of the most exciting tokens I have come across and I cannot wait for the launch of Pulsechain Mainnet!
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