LISK - first 24 hours of trading explained

A very interesting 24 hours of trading is just about to end so I decided to post my view of what experience can we get from this crazy first day of trading with Lisk (LSK) coin.

On 24th of May 2016. aprox 3.900 participants were able to claim 100.000.000 of LSK coins they payed for in Lisk crowdsale. In the same time, LSK IOU was allready traded on several exchanges: Yobit, Bloombit, Openledger for past few weeks. Price of coin was way above today's price and manny people were disappointed when price of LSK dumped in comparison with IOU prices. Let's explain what was going on here:

LSK coin was listed as an IOU on exchanges with their right to do so. In crypto community manny people call it IOU what really means I owe you. As I see it as a smart contract that relays on issuers reputation. So if someone ever before used this particular exchange for trading, they do believe them that asset will be settled and that gives them right for trading with that instrument. Other thing that needs to be explained is price and possibility of trading with that type of instrument. If we assume that eg. Yobit participated in crowdsale with aprox 100 BTC and got aprox 570.000 LSK coins, that lets them to offer that same amount on their exchange for trading. If we compare the full qty of issued coins (100.000.000) with Yobit example (570.000) we can see that qty of tradable LSK got smaller for 99.430.000 coins. The amount that is free for trading is called free float. Free float in this example is 570.000 or just 0.57% of total issued qty. Because of that small free float of coin, and big market demand, it was not hard to push price up due to lack of supply of the rest of issued qty. Since we did not got the information of Yobit or Bloombit about issued qty, we could not do any calculation on what is the free float of the coin at first day of trading on that exchanges.
Openledger is kinda different exchange. This is the only exchange I found that is truly decentralized and has much bigger transparency then two above mentioned. Short info about issued coin can be found on page https://cryptofresh.com/a/OPEN.LISK. It is not fully documented, but at least we got the total qty that is tradeable on that exchange plus every investor that is investing in this asset at bitshares exchange. More about this most interesting subject in my next post...

Second thing we should analyze here is Polo trading. There are two connected things about formed price on Polo: Market opening and price forming.
Market was opened aprox 8 minutes after the LSK coins became available for all crowdsale participants. None of participants were able to get their coins for about 20 minutes, maybe half an hour. During that time, investors were able to place their bid offers on the market but non of investors were able to put their sell orders. With this "type of coincidence" market formed bid without ask price. Manny of investors were forming first bid price for LSK as a very high price (I saw some orders of 2000 BTC per LSK etc). When first LSK were deposited on investor accounts, bid price was already formed and with that two conditions first trade was made. First trade was made with first bid in the orderbook. As I saw it it was 447 BTC per LSK with very small qty in order and Polo marked that opening price was somehow 0.051 BTC per LSK... That scenario is possible only in situation if: investor who opened order for buying LSK for 447 BTC removed his offer, second one was offer for 0.051 BTC per LSK and first transaction is made. At the same moment, there should not be any prices on ask side and new order for 447 BTC should be opened on bid side. When new selling order gets into trading station, it should be executed on 447 price. And then all other trades..
Due to very hight prices on bid side (during the time when no sell orders were on market), participants that want asset tried to form a price asset owners would be willing to accept for their LSK coins. At the same moment, non of investors had a clue what supply of coins will happen on market and how market will react. So in this case we have investor who puts very high bid for an asset when there is no sellers and when they get into market, price slumps due to wrong bid side assumption on market price. That is the reason we have falling market on the first day and -100% price change for first 24 hour trading day (price is obviously calculated from 447 BTC to market price).

Two main questions from this review for you:

1. What would happen if Polo did not wanted to accept bid orders and instead of that let supply of coin to form price? Eg. If sellers could put their offers on market for 30 minutes without knowing on what price buyers would like to buy, would price after that kind of opening go up or down?
2. Who are investors that put price of 447 BTC per LSK on market when there was no selling orders on market? Is that some manipulator investor or maybe Polo itself? Who can confirm or deny this?

Never mind, one thing is sure... Market says there is something interesting in Lisk... That is why price is x3 at this moment and trying to become stabile here. This is very interesting and strong information, manny people call it a scam but my thoughts on this project are complete opposite...

Best to all of you people!

For more information, please visit: https://lisk.io