The Swing Trader
Last updated
Last updated
The Swing Trader is a system used to help maintain Malt's peg on MaltSwap stable pools while also profiting from doing so. This is similar to the role traditional market makers play in other markets.
The Swing Trader serves a few purposes:
It helps maintain Malt's peg by injecting capital into either side of pools when they fall out of balance.
It provides a deepening of liquidity for sustained load on MaltSwap. Individual swaps don't benefit from this deepened liquidity, but the system constantly returns pools to their most efficient trading zone so the subsequent swaps can benefit. It is in this sense that the Swing Trader is deepening liquidity in the pool.
It generates profit by trading the price flucuations of of the MaltSwap stable pools.
The majority of collateral held by Malt in other stablecoins is stored in the Swing Trader. The Swing Trader can use this collateral to buy Malt back when its trading below its collateral backing price. Doing so has a positive impact on the collateral ratio. The Malt purchased is held by the Swing Trader until the price of Malt is above the collateral backing price. At this point the Swing Trader can sell the Malt back to the pool for a profit. This profit is then distributed in the normal way. The Malt held by the Swing Trader is out of circulation and does not count towards circulating total supply.
