Exploring the UM Price Surge: A Deep Dive into Bonding on Penguin Finance
The UM token experienced a price surge after launching bonding on Penguin Finance, which created a buzz in the DeFi community. In this article, we will discuss the reasons behind this price surge and its implications on the market dynamics.
Bonding Launch and the Initial Pump
The initial pump in UM’s price occurred around 9 am UTC on 26th April, coinciding with the bonding launch.
Bonders purchased UM from the market to pair with PAI, enabling liquidity providers (LPs) to obtain discounted staked UM on pngfi. These savvy bonders entered the bonding market at launch to secure the best possible discount. This process resembles a first-come, first-served (FCFS) game, with the UncleMine team offering an enticing discount to kick-start the launch and reward attentive supporters of the protocol.
Bond Price and Discount Dynamics
Following the launch, the market determines the discount, similar to a Dutch auction.As people bond, the bond price increases, causing the discount to decrease. Conversely, if no one bonds, the bond price drops, and the discount increases.
The bonding volume’s impact on bond price is determined by our bonding partner, in this case, the UncleMine team. We assist the partner in setting a reasonable weekly bonding target, such as $2,500 per week. This means that if the daily bond volume reaches $357, there will be no more discounts available for that day. Though, in reality, our bonding program operates on a second-by-second basis, emulating a Dutch auction style.
The Delayed Second Surge
After the initial pump at launch, the next surge didn’t occur until a day later. This delay resulted from early bonders claiming nearly all available discounts at the bonding launch. As bond trading here is slippage-free, they secured the bonded value at the best discount. To prevent whales from monopolizing the bond discount, leaving nothing for retail investors, we impose a limit on each bonding transaction, displayed as max payout on our UI.
The Continued Price Increase
The next UM pump occurred at 9 am UTC on 27th April, and its value continued to climb, culminating in a 24-hour, 21.62% increase.
This happened because people saw the attractive discount and bought UM from the market to obtain discounted staked UM. The ensuing buy pressure caused UM’s price to soar, and as the bonding market is isolated, the discount grew, prompting more people to purchase UM and contribute to the momentum. The discounted UM is then automatically staked to yield impressive APYs.
The (3,3) Game
As prices continue to climb, investors are motivated to remain staked and maximize profits. This is known as the (3,3), first identified by Olympus DAO and adapted by our team for various protocols on Solana.
The $2,000 Grant Program
We are currently running a $2,000 grant program in partnership with Parrot, offering an excellent opportunity for protocols using PAI as the LP pair to establish a bonding market on Penguin Finance
Penguin Finance — Marketplace on Neptune
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Lower Ponzi Scheme Potential
Finally, we believe that there is less potential for a Ponzi scheme here, as token prices cannot perpetually rise due to a specific mechanism. It always comes down to the underlying value of the protocol. UM tokens serve a valuable purpose, allowing users to purchase UMF tokens and farm USDC rewards.
The UM price surge highlights the power of bonding markets and their potential to reward early supporters while maintaining a fair and sustainable token ecosystem. It offers valuable insights for DeFi enthusiasts and market participants alike, proving that innovative mechanisms can drive growth and value in the crypto space.
UncleMine is a decentralized protocol that connects Web3.0 to the physical infrastructure behind it. UncleMine aims to bring all sorts of computing powers to smart contract platforms, enabling the physical infrastructure resources to circulate in the Defi world.
About Penguin Finance:
Penguin is a Liquidity-as-a-Service Platform that offers a one-stop solution for treasury management such as swap, bonding, and staking. A protocol can utilize the bonding service to acquire liquidity instead of renting it. Protocol-owned liquidity can help a protocol survive in the long run by staying with it during a downturn. Instead of fostering short-term involvement, token vesting will allow protocols to match their incentives and communities with their long-term goals.