Thread by @CryptoSeq

1/ It's important to understand the effect the buy back and burn mechanism of $INJ will have not only on the price but also the market cap

x100 increase in price does NOT equal x100 increase in market cap

Thread with examples of the amount 🔥based off other exchange volume👇🤯

https://twitter.com/CryptoSeq/status/1429048224661360642

2/ Sushiswap did $26 Billion volume in May, if Injective does that volume it would mean the total trading fees (maker + taker (0.3%)) would be $78 Million for the month
🔥60% are used to buy back and burn $INJ: $46.8 Million each month

🧑‍🤝‍🧑40% used for referrals: $31.2 Million

3/ 60% of the fees worth $46.8 Million (which contain lots of different tokens through the various pairs) will be auctioned (normally this will be every 2 weeks but for this example I will use per month as that is what the reported exchange volume of Sushiswap was based on)

4/ To win the auction the winner with the highest bid (has to be in $INJ) would win the $46.8 Million worth of various tokens and then sell them for arbitrage profit.
cryptoseq.medium.com/why-injective-…

5/ The total amount of $INJ in the winning bid is burned, reducing total as well as circulating supply of $INJ and thus as supply is decreasing the rate the market cap will rise slower compared to the price increase per $INJ.

6/ Even if the price of $INJ stayed the same for a month the burn would still take place, reducing supply and thus reducing market cap despite the price per $INJ staying the same.

7/ Unlike BNB where Binance just move some of their team tokens to the burn address, with $INJ the bidders have to buy $INJ from the market taking it out of circulating supply. Not only that but there will be multiple bidders which amplifies the effect.

8/ $31.2 Million are used for referrals to relayers to incentivise providing liquidity and growing the exchange further. DAOs could be formed that run relayers and rewarded for the traffic they generate which could be used to burn their favourite token.

https://twitter.com/CryptoSeq/status/1419655171265765378

9/ As the platform grows, so too does the amount of $INJ burned, creating positive feedback loops and even faster price rises as there is even less circulating supply each time a burn takes place. The auctions happen continuously every 2 weeks burning further $INJ

10/Even if there is a sharp downturn in the entire market, there will always be trading volume, which results in large amounts of $INJ being bought from the market and burned. The lower the price of $INJ the more $INJ that is burned creating continuous support and buying pressure

11/ Uniswap did $83.18 Billion volume in May, if Injective has that volume:

Total Trading Fees: $249.54 Million

🔥60% used to buy back and burn $INJ: $149.72 Million each month

🧑‍🤝‍🧑40% used for referrals: $99.82 Million

12/ With Sushiswap and Uniswap being on Ethereum (The volume figures above represent) they inherit the high gas fees, slow performance and suffer from front running / sandwich attacks through MEV. They are also AMM rather than order book which see far more volume on CEXs

13/ Binance did $1.5 Trillion Spot and $2.46 Trillion Derivatives volume in May, if Injective has that volume:

Total Trading Fees (maker + taker): $12.45 BILLION

🔥 60% used to buy back and burn $INJ: $7.4 BILLION each month 👀

🧑‍🤝‍🧑40% used for referrals: $4.98 BILLION 👀

14/ CEXs provide high performance order book exchange but are facing increasing regulatory pressure and this volume will move to DEXs. Listing times are slow and costly and less secure than the decentralised alternatives and the markets they can trade are restricted.

15/ Injective combines the best features of DEX and CEX and then goes even further with unrestricted access to markets worth quadrillions of dollars as well as building an entire ecosystem around it with full EVM support and bridges to all the main Layer 1 platforms

16/ With up to 10k tps, 2 second finality, zero gas fees and a DEX which is front running resistant providing a fair platform for all. There are no listing fees and pairs are added through governance to ensure there are no scam copies of tokens like you see with other DEXs

17/ Crypto Exchanges saw $4.8 Trillion Spot volume and $5.5 Trillion Derivatives volume in May alone. If Injective captures just 1%

Total Trading Fees: $309 Million

🔥60% used to buy back and burn $INJ: $185.4 Million each month

🧑‍🤝‍🧑 40% used for referrals: $123.6 Million

18/ With 1/3 of the circulating supply already locked in staking (earns 5% APR), and $INJ being able to be used as collateral then there is going to be a lack of supply on exchanges for people to buy for each auction, leading to rapid price increases.

19/ Especially when people know that there are going to be further burns every 2 weeks with large amounts being bought from the exchange regardless of the price of $INJ then not many are going to want to sell resulting in price rising faster.

20/ The strong referral program has shown how well it worked for Binance in the early years
Having an entire ecosystem built around it has worked so well for the likes of $LUNA, and Injective also benefits from continuous demand regardless of market conditions

21/ Higher Volume > More $INJ 🔥+ more💵for referrals to drive further growth > Higher price per $INJ > More Volume > More $INJ 🔥 and so on as the cycle continues.

For more Info 👇
cryptoseq.medium.com/why-injective-…