Impact of a specific transaction on the coin price. How to calculate?
Impact of a specific transaction on the coin price. How to calculate?
Hi guys,
Is it possible to somehow approximately calculate what impact a specific buy or sell will have on the market cap / price?
For example, the price of a coin is $1, market cap $10M, some whale is dumping $500.000 or buys for $500.000. What price / market cap is it going to be after?
Thanks
Price is decided by the market. It can be decided by supply and demand but can be changed by manipulation, news, big transaction from old address.
Generally, a single transaction can not change or affect the market too much. But if it is a big one or comes from satoshi address, and is shilled on the news, social media, the effects can be very huge.
So it depends on what type is a transaction. Without its quantitative value, its origin, we can not guess about its effect.
Exchanges like PancakeSwap that use the automated market maker(AMM) model doesn’t have orderbooks; so instead of price volatility depending on exchange depth, it will depend on deposited liquidity. If you didn’t know, people can deposit liquidity(e.g. BNB and USDC of equal amounts for the BNB/USDC trading pair) on AMM exchanges so they can earn a share of the exchange’s fees(mostly 0.025-0.3%). So the higher the trading pair’s liquidity is in contrast to trading volume, the less volatile it will be.