Use Cases
While Poolshark is a general-purpose AMM that can be used for a wide variety of applications, some use cases are more popular than others.
In this article, we will cover two reasons users choose Poolshark at the moment: swing trading and programmatic sales.
Limit
1. Swing Trading
Limit LPs can be utilitzed to buy or sell an asset in a favorable price range.
Swing trading is a style of trading that aims to exploit short- to medium-term price movements in an asset using favorable risk/reward metrics. Swing traders primarily rely on technical analysis to determine suitable entry and exit points, but they may also use fundamental analysis as an added filter 1.
This strategy involves holding a position either long or short for more than one trading session, but usually not longer than several weeks or a couple of months. The goal of swing trading is to capture a chunk of a potential price move. Successful swing traders are only looking to capture a chunk of the expected price move, and then move on to the next opportunity.
Poolshark Limit LPs allow traders to lock in their trades to the nearest price tick, decreasing time spent on position management.
2. Programmatic Sale
Programmatic sales are available through Poolshark Limit by creating a pool along with a Limit LP.
In a programmatic sale, an Automated Market Making (AMM) curve is used to distribute the sale over a price range on an x*y=k curve. This means that the price of the token increases as the quantity sold increases, creating a dynamic pricing system that adjusts according to supply and demand.
This method allows for efficient distribution of tokens and helps to avoid price spikes that can occur with traditional sales methods. It also ensures that all participants have an equal opportunity to purchase tokens.
On the other hand, a Dutch auction is a type of sale where the price of the token begins at a certain level and gradually decreases over time. This method is designed to ensure that the token is sold at a fair price, taking into account the perceived value of the token by the participants.
The price decrease is gradual, allowing participants to bid at different price levels and potentially receive a token at a price they consider fair. However, this method could lead to price instability and potential price drops, as the price of the token is not directly linked to its actual worth.
In conclusion, Programmatic sales and Dutch auctions provide different strategies for selling fungible tokens.
The choice between the two depends on the specific goals of the token sale, such as:
- the desired price stability
- the distribution of tokens among participants
- the overall market conditions
Poolshark Limit is recommended for use as a programmatic sale to ensure exact pricing for all parties.