Bonding Curve
The Bonding Curve mathematically analyzes the active circulating amount of a coin or token in the market and the market price and calculates the direct ratio of the circulating amount to the market value. The bonding Curve emerged from the idea that the second investor should invest more expensively after one person invests in the said investment instrument. The source of this thought stems from the decrease in the asset’s active presence in the market.
What Does Bonding Curve Mean?
The Bonding Curve refers to the increase in the value of investment instruments with increasing demand due to the competition in the market. The reason for such an increase in value is due to that the number of cryptocurrencies in circulation is limited. For example, while Bitcoin was not even worth dinner money years ago, its value is increasing rapidly day by day as a result of increasing interest and intense investments.
In this way, as current examples increase, psychology emerges that pushes them to constantly invest in order not to miss opportunities.
How Is The Bonding Curve Formed?
As the demand for a newly released crypto money project increases and the project grows, this Bonding Curve is formed with increasing demand as the supply remains constant in the supply-demand balance. This curve shows the increase in the value of the investment instrument in line with the increasing demand.
The direction of any curve occurring in the market is not continuous. In line with the fluctuations in demand, there are also fluctuations in Bondin Curve. Although the curve continues in a certain way in a regularly bought crypto money, fluctuations will occur in the curve when the purchases stop or the sales get ahead of the purchases.
Different Types of Bonding Curves
Although they have a positive and upward trend in general, the opposite will inevitably happen. These different forms of Bonding Curves are also used to attract investors. Project owners highlight their positive Bonding Curves to attract the attention of investors.
