A little background. my main participation in Defi has been speculation on Defi tokens, liquidity provision for stable swap amms and most profitably arbitrage.
I have left my participation in blockzero on the back burner over the past few months as my focus has been turned to other projects, so it seems I’m too late but none the less since a search of the forums had produced no result for my concerns having previously voiced I’ll still make this post.
By incentivizing XIO for stable pairs you create arbitrage opportunity across the pools, this is fine and is part of the Defi ecosystem for price discovery. however unless you believe that this current bull market has come to an end and we are about to endure another crypto winter this is the worst possible timing for such a measure.
By creating a pair with multiple stable coins, at the bottom of the market for Ether you have ensured that XIO will fail to track with recovery. Defi is still a zero sum game, if Eth increases in value, the value of xio in the xio/eth lp increases, meanwhile the value of xio in xio/dai remains the same. by purchasing xio in the dai pair and selling to the eth pair I bring these into equilibrium and pocket a profit. My profit comes directly from the capital invested in XIO as generated by the vol in ETH.
this is actually good for projects because it stabilizes price however, this measure should have been introduced at 4k eth to reduce down side not now. by introducing incentivized stable pairs at the bottom of the market you have retarded XIO ability to recover in price. To apply game theory to this problem a step further should there be no fundamental drivers for xio price in coming months the inflationary nature of the tokenomics compounded by likely poor performance vs eth will reflect poorly on technicals further driving away speculative capital.
this is a bad move.