$NUMA Price Movement

Whether in dollars or rETH-backing, $NUMA price movement is unique

The $NUMA token represents the overcollateralization of the numa protocol, backed by rETH. A market cap of $10m means there is $10m surplus collateral in the system that can be used to mint synthethics. With most protocols, price movement is correlated with market cap, such that if the market cap goes up 10%, then the token price goes up 10% and vice versa; however, the $NUMA token operates much differently. There are two main mechanisms for $NUMA price movement: (1) the volume of transactions that incur fees which result in an increase in the rETH backing of all $NUMA tokens in circulation; and, (2) the price movement of ETH in relation to the price movement of issued synthetics. Additionally, the elastic supply means that various situations are possible. There could be a situation where the market cap is $10m and the price is $1; conversely, there could be another situation where the market cap is also $10m, but the price is $10. Below is a summary of all the instances when the price of $NUMA changes.

Price increases:

1. $NUMA tokens burned or minted

   1. Simply "buying" or "selling" via the vault

   2. Minting or burning via the vault to arbitrage price pegs for nuMoney

   3. Minting or burning via the vault to profit from price discrepancy between LP and the vault (arbitrage)

   4. Minting or burning $NUMA to or from nuMoney

   5. Opening, closing, or liquidating leveraged positions

   6. Liquidating loans

2. ETH price movements

   1. If ETH increases in dollars, $NUMA increases in dollars

   2. If ETH outperforms synthetics (more here)

Price decreases:

1. ETH price movements

   1. If ETH decreases in dollars, $NUMA decreases in dollars

   2. If ETH underperforms synthetics (more here)

2. When protocol tokens are unlocked (more here)

The general rule for the price of the $NUMA token is that the LP price will move between what we call the "upper band" and the "lower band". The upper band refers to the $NUMA mint price via the vault, and the lower band refers to the $NUMA burn price via the vault. The nominal 5% mint fee and the 5% burn fee mean that there is a space of 10% where the LP price can move in between these bands. Anytime there are any transactions the incur fees or ETH outperforms the synthetics, the bands move up. Anytime the synthetics outperform ETH or tokens are unlocked, the bands move down.