The State of Osmosis-November 4, 2022

October was an exciting month for Osmosis. A growing number of tokens were listed, growth in Osmosis token liquidity continued and, to cap it all off, OSMO was listed on Binance.

All of these events have generated buzz and positive price action. This week I want to examine the effects of large price spikes around the OSMO token and what they can mean for liquidity in paired pools. Additionally, I want to examine the substantial growth of token liquidity not seen since the Terra days. Is this a positive sign? I like to think so.

The Biggest Listing to Date

On October 28, 2022 Binance announced it would list Osmosis spot trading pairs:

• OSMO/BTC
• OSMO/BUSD
• OSMO/USDT

The announcement brought with it a flurry of volatility around the OSMO token, propelling it almost 35% for the day as excitement for additional demand drove investors and traders to buy the token.

But where and how did this liquidity come from to purchase these OSMO tokens? Looking at the amount of liquidity flows for the week can certainly give you some clues:

• ATOM 3.57%
• USDC 20.77%
• WETH 40.00%
• BTC 13.22%
• DAI 9.92%

The largest spikes of liquidity came via Axelar bridged assets, and not from an inflow of ATOM tokens as one might expect. It is also important to notethat the large increases in OSMO price action creates large arbitrage opportunities, which make up a portion of the recent volume spike.

The biggest increase came for WETH, where a total of 1400 WETH tokens were brought into Osmosis and traded on the 28th. The result of this activity was an increase in the GAMMS within pool 704.

This increase in volatility pushed the number of GAMM tokens to an all time high, and with it came an increase in the number of wETH on Osmosis.

Similar activity could be witnessed around pairs which solely depend on OSMO for their source of liquidity, such as Pool 678.

The same pattern could be witnessed here as well, with 22 Million USDC traded in a single day, quite impressive for a DEX with $240 million in TVL.

Dai also showed the same pattern but at a lower rate of activity, with 1.2M in total trading volume.

This volatility causes not only a spike in the price of OSMO but also meaningfully lowered the percentage of OSMO making up the total TVL composition. For the week, LPs lost a total of 76,623,854.31 OSMO tokens, a Decrease of 10.74%

This is a combination of volatility-driven rebalancing of pool token liquidity and increased demand for the OSMO token, a sign of positive economic activity for the protocol.

This week saw one of the largest per day increases of the OSMO token price. Our TVL has reached levels not seen since May of 2022, with trading volume picking back up to $460 Million USD, all pointing to the continued resiliency of the Ecosystem.

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