Sui price volatility could resume as Foundation withdraws 117 million SUI tokens from external market makers

Sui (SUI) price has been trading within a narrow range, not giving actionable room for longs and shorts to get value for their bets. From an onlooker’s perspective, the price action has been on a stealth but range-bound downtrend since early in the year. Sui Foundation proposal to relocate 117 million SUI could spark some volatility in the SUI price.

Also Read: SUI price crashing by 7% sets a precedent for cryptos ahead of $36 million worth of token unlocks

Sui Foundation plans could restore price volatility

Sui Foundation has revealed plans to withdraw 117 million SUI tokens from external market makers, worth approximately $51 million at current rates. The tokens will be repurposed, and put towards ecosystem and community growth, including funding developers. This also considers distributing them as well as the recently announced 25 million staked SUI Tokens to the winners of the Sui Liquidity Staking Hackathon.

The move could inspire some volatility for Sui price. This is because market makers help in keeping crypto prices of an asset in control within a cryptocurrency exchange. Specifically, they are incentivized through lower trading fees or rebates as a reward for maintaining market stability through liquidity (volume) addition and volatility reduction.

These individuals or entities are savvy on matters of order books, algorithmic tools, and market-making strategies, steered by other goals beyond liquidity provision. They manage risks and tighten spreads between prices, thereby achieving more efficient and cost-effective trades.

Sui crypto has a circulating supply of around 860.4 million tokens, meaning withdrawing 117 million tokens would indicate a 14% reduction. More closely, it would mean a 30% reduction from the 396 million allocation given to market makers at launch.

Notably, Sui recorded a rather controversial mainnet launches around May 2023, thrusting the secretive role of its market makers into the spotlight. This raised concerns on whether its ordinary investors were getting a fair deal.

Cryptocurrency metrics FAQs

What is circulating supply?

The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its inception, a total of 19,445,656 BTCs have been mined, which is the circulating supply of Bitcoin. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.

What is market capitalization?

Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value. For Bitcoin, the market capitalization at the beginning of August 2023 is above $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the Bitcoin price around $29,600.

What is trading volume?

Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.

What is funding rate?

Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.

Sui price consolidates within narrow range

Sui (SUI) price has been consolidating within a narrow range for months on end, tightly bound between three Bollinger Bands, the upper and lower at $0.4867, $0.4165 and their basis at $0.4516 on the one-day timeframe. The bands come closer during low volatility and widen during high volatility. Based on the outlook below, volatility has been knee-high for SUI token since around mid-July.

SUI/USDT 1-day chart

The announcement by the Sui Foundation, however, could change the narrative soon, as it aims to pull 30% of the tokens from the hands of those responsible for keeping prices in control.