$NUMA Price Movement

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

The $NUMA token represents the overcollateralization of the numa protocol, backed by a corresponding LST. 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 LST-backing of all $NUMA tokens in circulation on a corresponding blockchain; and, (2) the price movement of an LST 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 a vault

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

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

   4. Minting or burning $NUMA to or from nuMoney

   5. Opening, closing, or liquidating leveraged positions

   6. Liquidating loans

2. LST price movements

   1. If an LST increases in dollars, $NUMA increases in dollars

   2. If an LST outperforms synthetics (more here)

Price decreases:

1. LST price movements

   1. If an LST decreases in dollars, $NUMA decreases in dollars

   2. If an LST underperforms synthetics (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 a vault, and the lower band refers to the $NUMA burn price via a 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 a corresponding LST outperforms the synthetics, the bands move up. Anytime the synthetics outperform a corresponding LST, the bands move down.