Fact or Fiction: Is QASH Being Used?
Now that we have been able to collect data, we attempt to answer if QASH / LQC is actually being used for trading fee discounts on Liquid - our initial answer is yes.
Now that it has been a few weeks since Liquid launched their trading fees, we wanted to follow-up our first post to understand if our assumptions around usage were close to the mark. We have received several messages challenging our work due to the relatively flat QASH price during this period, and so we wanted to visit the data to understand if we needed to adjust our forecasts.
In this article, we share our findings from our volume data analysis, and provide strong evidence that QASH / LQC is being used for trading fee discounts by global traders.
We Isolated the Effect of Fees to Understand the Volume Driver.
At this stage, we see two potential drivers of QASH trading volume:
Usage for Trading Fee Discounts
While there is nothing wrong with (1) price speculation, we wanted to understand if this token was also being used for its (currently) intended purpose.
To isolate out price speculation, we wanted to understand how QASH / LQC volume correlated to the Liquid exchange's trading. Given QASH / LQC offers a 50% discount on tradings fees at Liquid, we would expect to see steady volume from (2) Fee discount usage, whereas (1) price speculation would likely move in sharper peaks clustered around announcements.
To perform this analysis, we chose three distinct time periods to observe QASH volume:
Baseline Observation: Time periods w/o major announcements or high BTC volatility.
Fees Announced, Not Engaged: Time period between announcement of trading fees until the fees were engaged (Note: We expected significant speculative volume).
Fees Engaged: Time period after engaging fees through the date of this article (Note: We expected a high correlation here would indicate fee usage).
In the end, this metric appears even more useful as a predictor than we had anticipated.
Our Findings Lead Us to Strongly Believe QASH / LQC is Used for Fee Discounts.
Our findings strongly support the conclusion that QASH / LQC is being purchased to use for trading fee discounts on Liquid. Our baseline observation shows a very low correlation of QASH volume to Liquid volume - expected given the uncertainty around fee structure and timing. Once the fees were announced, we see a high spike in QASH / LQC volume, which supports our assumption that the volume was driven by price speculation (especially as the QASH volume has almost no correlation to Liquid volume).
The most interesting findings come from the extremely high correlation of QASH volume to Liquid volume after trading fees were engaged. Based on this analysis, Liquid's trading volume can explain 71% of QASH trading volume - which is even more significant as this is a departure from the low correlation of the previous periods.
While volume is not a predictor of price, this is encouraging for the long-term. Now we just need to know what Quoine has planned for the QASH / LQC they collect.
Note: We use QASH and LQC interchangeably in this article.
As always, we want to caveat that any opinions expressed in this article are those of the author(s), and are not financial advice. Please take personal responsibility for yourself and your actions.
Our authors trust their own research, and may own positions in assets covered in this article (if applicable). Please do your own research to corroborate our findings. For our full disclaimer, please see HERE.