Bonding Curve: Binance "grasps" the psychological momentum of retail investors

Written by: Saye

Think about the question, if Binance is destined to fail to stop the rise of Hyperliquid, then how should it maximize the benefits?

Caption: HyperLiquid vs. Binance futures trading volume, image source: @TheBlock__

At a time when $PUMP Hyperliquid has outperformed many CEXs, Binance, which is under the most pressure, has responded by increasing the liquidity of Binance Alpha, note that it is the intraday liquidity of the alpha that is being boosted, not the return of participants.

In order to avoid the "disappearance of the Binance listing effect", it will lead to Alpha, contracts and BNB Chain, but it is too strange for exchanges not to do transactions, so the trading attributes of Alpha must be improved.

In addition, empowering $BNB is essential for the entire Binance-YZi-BNB Chain system, and the earnings of BNB holders are the daily liabilities of the Binance system, and more use value, and even emotional value, must be introduced in addition to economic value.

To sum up, Binance Alpha opened trading for two reasons:

1. Counter the Hyperliquid listing effect and increase Binance's overall liquidity;

2. Empower $BNB More practical value and improve the stability of the Binance system.

On these two points, it is easy to understand that Binance and FourMeme have opened Bonding Curve and TGE, and even entrained, which has led FourMeme to keep up with the wave of Meme launcher revival of PUMP issuance, after all, Bonk and MemeCore can be popular.

For more information, please refer to: Pump/Bonk/$M three-point meme, two paths for asset issuance

Choose Bonding Curve to drive initial liquidity

According to Binance's announcement, the Bonding Curve TGE token is Aptos DEX Hyperion.

We will not introduce the project in this article, and this article will not cover the token price, etc., but only answer the logic of why Binance chose Bonding Curve for the Founder to think about the future listing plan.

Caption: @hyperion_xyz/center, image source: @BinanceWallet

After reading the announcement, you can extract the need to hold BNB, resell it in the Bonding Curve system after successful subscription, and enter the normal alpha trading system after the event, which is essentially encouraging intraday trading, as opposed to pre-market trading in the alpha market.

After that, Binance's trading system has at least four layers, Bonding Curve trading - > Alpha trading - > contract trading - > spot trading, and it is a selective system, which may not necessarily enter the Binance main trading system.

This happens to be able to cover up or solve Binance's biggest liquidity crisis at the moment, by creating more initial liquidity mechanisms, going back in time, Bonding Curve did not solve the liquidity creation problem, but artificially increased the number of candidates to collide with the most likely meme token.

Looking back on the development history of DEXs, LP Token is the tool that really solves the liquidity supply, and the AMM/order book mechanism needs to cooperate with it to support its own operation, but Binance's problem is a bit complicated, it is not an early-stage project, but it has the biggest problem of early-stage projects - liquidity is shrinking, and the value capture ability of $BNB is declining.

In contrast, PumpFun is an intraday Bonding Curve + an off-disk AMM pool, and there is a paradox in Bonding Curve itself - the greater the demand, the higher the price, which is like the more demand for buying a house, the more the house in Yanjiao appreciates, and as soon as the inflection point of the market arrives, it will immediately collapse, and there is no room for a gentle decline.

PumpFun does not solve this natural paradox, but to reduce the cost of launch to the extreme, attract more attempts, Yanjiao will fall, Dubai will not rise, the global liquidity of the currency circle and the possibility of any attempt, so that the internal disk has become the cheapest launch site, 1000 internal disks run out of 10 upper and outer disk DEX, of which 1 is on the CEX.

If the number of internal disks is increased to 10 million, then the liquidity of the entire market will increase instantly, from the internal disk, the external disk DEX to the CEX will usher in a splash of liquidity, of course, it will eventually collapse.

It can be predicted here: there will be an increase in Binance Alpha Bonding Curve TGE events for a period of time after that, otherwise it will not have the effect of liquidity creation and directing to the master and BNB.

Taking it a step further, Bonding Curve is actually more like a Rebase stabilization mechanism, the former is based on the logic of "the more demand, the higher the price - the better the liquidity of the >", and the logic of the latter is "the more you buy, the stronger the reserves + the more you sell, the more you make - the more stable the price of > stablecoin".

The problems of the two are also highly convergent, they are both based on the "normal" part under the law of large numbers, that is, they do not consider the impact of extreme events, and in the case of the law of 28, they consider more 80% of the cases and do not care about the 20% exceptions, and finally one dies from the shock of Luna-UST and the other is sucked dry by $TRUMP liquidity.

Study the mental momentum and wait for the one-hit kill

There is a momentum phenomenon in the market, which is that it will rise higher than we predicted, and vice versa, and it will fall deeper than the fair value of the market.

The assumptions that Bonding Curve relies on are inherently unreliable, but they are very much in line with Binance's real-world needs:

• Create initial liquidity: Binance Alpha itself has a sufficient market foundation, so it is not "built-in liquidity", but a liquidity front, which directs the alpha liquidity after its own opening, and other DEX/CEX trading liquidity to the Bondng Curve area;

• Pricing Expectations Trigger Demand: Just as Pre-Market (pre-market trading) is about pricing, Bonding Curve will also trigger pricing games, and then promote demand trading, so that users will not become watchmen before the collapse of the Bonding Curve by selling tokens.

• Digesting the listing effect: The Bonding Curve is a market game, through which Binance can avoid the weakening of the liquidity of the main site due to the decline in the listing effect, and theoretically get a fairer pricing.

Caption: Why Bonding Curve, Image Source: @BinanceWallet

So, at what cost?

As mentioned above, the PumpFun version of Bonding Curve relies on a large number of internal disks to give birth to super single products, and there are still too few listing events in the Alpha activity area, even if the project parties in the entire cryptocurrency circle are pulled over.

However, Binance Alpha will assume the role of the initial price discovery of the project side, referring to the $JELLYJELLY Binance and OKX sniping Hyperliquid, I personally feel that the CEX will unite against Hyperliquid, and Binance will bear the brunt of it.

The trick to grab liquidity is to find the price, retail investors want to buy the lowest cost, sell the highest return, if Binance directly pulls up the listing effect, it will inevitably pay a higher price, but in the name of helping retail investors find the earliest price, liquidity will naturally come.

Then, waiting for the extreme black swan event to explode Hyperliquid in one fell swoop, just like Bybit was stolen and broke its bones, it doesn't matter if CZ/Binance was fined 4.2 billion, just like Hyperliquid was extremely transparent and reversed, Binance then poked it, just like FTX was easily pushed down, and CZ came out as a big cousin.

epilogue

Volume is Binance's biggest advantage, flexibility is Hyperliquid's offensive means, to delay and wait for change, fighting a war of attrition is a reasonable choice, Binance chooses price signals, Hyperliquid is moving towards the listing effect, and liquidity is the result of the hegemony between the two, not the reason.

It's just a pity for the alpha users, who are the cows busy for, the sugar is so sweet, how can the people who grow it live so hard.