How Uniswap Will Impact Hive-Engine Trading

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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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Good insight about these arbitrage opportunities, for sure there will be lazy people or those whom might not pay attention enough of care and such situations will surely appears.

One question although:

  • Let's say I buy LEO from Hive-Engine and wrap it as wLEO on Uniswap, do I always need to put ETH as collateral or it will be enough to go through wLEO?

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There will be plenty of arbitrage opportunities (in my opinion).

You only need ETH as collateral if you're providing liquidity to the Uniswap pool.

If you're looking to trade wLEO (i.e. sell wLEO for Ethereum), then you only need wLEO (and just a little ETH to cover gas fees).

The only situation when matching collateral is needed is when you're posting liquidity. Outside of that, having wLEO is just like hodling any other token: you can trade, HODL, send, etc.

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Thanks for the response. Still, I will need to use Metamask or just have a Uniswap account where I could deposit LEO directly?

This is still blurry for me and if you could pin point to one of the threads explaining it, or just giving a simple explanation that will make things cleared for me. Much appreciated.

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well, you do not need metamask as such but metamask is the way to handle your ETH addresses just like keychain is on hive.
Since wLeo is going to be a ERC-20 you should have an ETH address and as such one of the easier and secure ways of handling those is with metamask

Thanks for the response. Still, I will need to use Metamask or just have a Uniswap account where I could deposit LEO directly?

This is still blurry for me and if you could pin point to one of the threads explaining it, or just giving a simple explanation that will make things cleared for me. Much appreciated.

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Ok, I will grant you that what you are saying is true...

But why would someone trade wLeo in the first place?

I guess that having a good liquidity pool helps but that cannot be the whole reason?
So why would someone trade a little coin from an even smaller platform (playing attorney of the devil here)

That's a great question.

"So why would someone trade a little coin from an even smaller platform"

I actually believe it's flipped the other way around. People will trade wLEO on Ethereum and ask why anyone would trade LEO on Hive-Engine -- since Uniswap is going to have much deeper liquidity and volume than HE.

This is the main point we were making in the video: Hive-Engine is a niche exchange that is available to a very select audience (people who understand Hive well enough to have an account, understand the second-layer HE exchange, etc.).

Uniswap makes it as easy to trade LEO as any other ERC20 token - which is something that vastly more people understand as compared to Hive.

Our target audience here isn't Hive people, it's ETH people. If you're on Hive, you can trade LEO on HE with no fees.. BUT if you're on Hive and you want to trade LEO in large quantities, I think you'll turn to Uniswap for the deeper liquidity.

"But why would someone trade wLeo in the first place?"

I answered this above from the Hive person's point of view (for deeper liquidity/less slippage than HE). From the ETH person's point of view: people are hunting for projects on Uniswap that both have the potential to skyrocket in price and also have a solid fundamental basis behind the coin. I think we have both and from the conversations I've had with DeFi people that we recently contact about our listing, they tend to see it that way as well.

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good to know, well for now I am keeping a tight hold on my LEO, thanks for the comprehensive answer

Hey it may sound critical but I can't follow the logic,referring to the last part of you comment; that solid fundamental basis is build on HIVE, so if ETH-people were not interested in wHIVE, what will make them be interested in wLEO? As an analogy, who buys ERC-20 tokens without holding ETH?

One of the major impacts will be on the opportunities to trade LEO on Hive-Engine.

This is definitely goona be quite an awesome experience. Trading LEO on Hive-engine.. It has always been my desire

As a trader, you want high trading volume, high liquidity and high volatility.

Can’t agree more.

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Great insight here. Thanks for this eye opener on arbitrage opportunities.

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How will you brand leo token on other exchanges?
There are a couple of leo tokens existing and even one with almost the same logo.

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Exciting times and developments. Thanks for keeping us informed :<)

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