What do you think of his comment?
But one thing is for sure, if Iconomi doesn't start market buying with their profits, they will quickly have $millions worth of assets backed up sitting in buy orders on exchanges. For example, there is only around $1,000,000 worth of ICN for sell on Kraken at any given day, but the ICNP is already sitting on a potential $9 million worth of buybacks if they break even on all sold investments. If they don't use some to market buy and move the price, nobody would ever sell.
Seems pretty valid at first, but I still think market orders are only good in short-term and will eventually do more harm than good.
Let's try to analyse this:
For the sake of simplicity assume $1m daily trading volume split half and half between "buys" and "sells"
Also assume Iconomi makes $9m in profits to distribute each quarter (90 days)
So about $100k worth of buybacks every day. That meets about 20% of all "sells".
Shouldn't be a problem really.
Also, Kraken isn't the only place to trade and I think more big exchanges will list ICN eventually.
What could be an issue (although not necessary) - a development of clever algorithm that would be constantly adjusting to ever-changing crypto-market conditions and placing right bids at the right time.
Ok, $1m trade volume is generous, but a good round number...so $100k in buy back everyday on top of the normal amount, so like you said, a 20% increase in demand. A 20% increase in demand would result in a higher magnitude change in the actual price of the token, not just a 20%. This would result in some serious upward momentum based on economic theory assuming a normal elasticity...ICN's supply is inelastic since quantity is fixed (BUT quantity decreases as buybacks occur). There is multiple factors occurring where these buybacks could get out of hand quickly.
Here is a perfectly inelastic supply line. Note Do moving to D1 and how Po goes to P1:
https://econmicro.files.wordpress.com/2012/10/perfectly-inelastic-supply-in-market-period1.jpgAnd here is a "normal" supply (fiat currency):
https://www.ezyeducation.co.uk/images/Lexicon_Images/supply_cuve_shifts.pngNOW decrease the supply and your price change is even greater...
SO, looking at the first graph, move S to the left (call is S'). You'll now be let with a new P- price (call it P2),which will be even higher than P1 since the equilibrium will be where D1 and S' theoretically cross. There are 3 factors causing the magnitude of change to be more than 20% (increase in demand, decrease in supply, and the fact supply is inelastic).
I'm not really offering a solution, just noting the problem.
