One of the key indicators that NFT traders use is liquidity. Increasing levels of liquidity in a collection indicate a healthy and attractive market, while reducing levels of liquidity indicates a market is dying, signaling it’s time to exit the collection.

Teams like NFTX build solutions to ensure liquidity for potentially illiquid tokens. NFTX makes it possible to always sell floor-priced NFTs, helping the collection to remain investable and giving current investors peace of mind.

A similar product is  Sudoswap, which has one-click NFT trades with low fees. And it’s about to burst the dam holding back a tide of liquidity for the NFT market. 

Sudoswap’s improvements mean every trade is a bit less risky and more profitable. Whether trading small quantities of blue-chip collections such as Crypto Punks, or higher volumes of mid-tier and free-mint NFTs, the improvements matter. Understandably, Sudoswap has seen explosive growth in trading volume over the last week.

Sudoswap volume in ETH Source: Dune Analytics

Aside from benefitting traders, the platform may change how creators launch collections. A downside to Sudoswap is that it doesn’t pay royalty fees to creators. To get around this, creators can fund pools containing both their NFTs and ETH that people can use for trading, achieving two things: ensuring NFT liquidity and making money.

Firstly, the investment of ETH in the pool shows financial commitment to the collection. The idea has been loosely termed ‘rug prevention’ and helps to reduce the risk that so many creators, traders, and investors face in a market where trust is routinely abused. If a collection “dies,” NFT holders end up being locked in illiquid tokens.

The second achievement is that creators receive trading fees from the pools they fund instead of royalty fees. While these are lower than the creator’s fees they would have received, it reduces the cost of trade, making the assets in the collections more attractive. This potentially increases the number of transactions and forms a long-lasting source of income.

Potentially, teams will compete for in-demand assets to capture trading fees from popular collections, increasing demand and driving up prices and revenue. This activity may create the flywheel that sends us all to NFT Valhalla.

With Sudoswap set to make a lasting change to the market for all users of NFT platforms, it’s worth looking at ways to get exposure, especially as airdrop speculation has already started.

Firstly, simply buy NFTs from any of its pools. If you’re looking to trade them back quickly, look for trending collections – specifically on Sudoswap. To do this, use Sudoswap’s tools, such as this Dune Analytics dashboard, to see what is trending.

On the dashboard, scroll down to the ‘Collections’ and ‘Latest Swaps’ sections to see which collections are being bought and sold in the highest numbers on the lowest time frames. These are attracting the greatest liquidity from traders at the moment, so if you want to buy something to sell quickly, they’ll be your best bet. You will only lose on fees, not slippage.

A second method is to use Sudoswap to sell NFTs by creating an NFT pool. Click here to go to the ‘Pools Overview’ page, then when clicking on the ‘Create New Pool’ button, you’ll be guided through the setup process.

Connect your wallet and Sudoswap will automatically detect which NFTs you hold, enabling you to choose which ones to sell. Now you’d normally specify which currency you want to receive in exchange for them, but only ETH is available at the moment.

Next, you’ll be asked to specify the pricing and ‘delta’ values for the NFTs in the pool. This is where some thought is required. The price you set needs to be appropriate to the market and the rarity of the NFTs you hold.

Let’s say you hold some Based Ghouls – one mid-tier and two floor NFTs. If you list them all in the same pool, they’ll all be available at the same price, undervaluing the rarer NFT. You’d be better to list the mid-tier one in a separate pool.

The delta value for the ‘bonding curve’ needs to be set. A bonding curve is a formula that determines how the price of NFTs in the pool changes with each sale. Linear delta changes the sale price by an equal amount, while exponential delta changes the sale price by a larger amount each time.

So, a sales price of 1 ETH for our floor Based Ghoul, with a linear delta of 0.1 ETH, will mean that the first one sells for 1 ETH, the second will sell for 1.1 ETH, the third would be 1.2 ETH, and so on. The ‘bonding’ (price) curve would look like the graph below – a straight line.

Linear pricing for 100 NFT sales, each with a 10% price increase. Final price: 10.9ETH.

Note that the delta value is equal to ten percent of the price. I’ll use ten percent again for the exponential delta example, but the result will differ.

Assuming the collection’s value is fairly static, or you’re a creator launching your collection, linear delta is probably better. It prevents the price from moving ahead of the market too quickly, making your NFTs too expensive. You can even set linear delta to zero to keep the price the same, as a creator might want to if selling a portion of a collection on the site.

Exponential delta is applied as a percentage of the price and useful for collections that are expected to change more in value. Imagine a piece of news that Based Ghouls holders qualify for an airdrop of Sudoswap tokens, the price would quickly increase. In this case, exponential delta will help capture that increase. Let’s work through an example, using ten percent again.

An exponential delta value of 10% and sales price of 1 ETH would add 10% to each sale. Therefore if the first NFT sells for 1 ETH, the second will sell for 1.1 ETH, a third would sell for 1.21 ETH, a fourth would sell for 1.331 ETH, and so on. The price increment grows more with exponential delta than with linea for each sale. 

Notice the clear curve in the image below and that the scale on the Y axis extends higher than the Y scale on the linear pricing graph above.

Exponential pricing for 100 NFT sales, each with a 10% price increase. Final price: 12528 ETH.

Selling NFTs on Sudoswap is probably one of the best ways to get involved with the platform right now, especially if you don’t fancy the idea of trying to trade. However, you can also set up pools containing NFTs and ETH, as I mentioned before. 

The general mechanism is the same, choose the NFTs you want in the pool but also add ETH equal to the value of those NFTs. You then set a price and linear or exponential delta values for your bonding curve to control how the price will change. The difference is that instead of just selling NFTs in exchange for ETH, your pool will also buy NFTs, paying with ETH.

These pools’ bonding curves therefore work in both directions. Linear or exponential amounts will be added or subtracted from each sale, depending on your settings and whether users are buying or selling NFTs from you.

Consequently, the pool should track market prices up and down accurately if the bonding values are well set. Your NFTs will remain competitively priced, and the pool should stay stocked with NFTs and ETH as users buy and sell into and out of it. Meanwhile, you earn trading fees.

The biggest downside risk is that should something negative happen to the whole market, or just the collection you’re trading, your pool could be used to rapidly sell unwanted NFTs, taking all the ETH from it.

Our final tip for today is to consider buying XMON. This is the currency of the 0xmon NFT project created by 0xmons, the creator of Sudoswap. While the XMON price is probably too high now, should the market reach a local top and begin selling off, purchasing at lower prices could become attractive. The gamble is that XMON holders will become eligible for a possible Sudoswap airdrop.

Overall, there are several ways to get involved with Sudoswap, and I hope one of the methods I’ve shared fits your style. The platform may be new and still very small in comparison to the market leader OpenSea, but it is disrupting the market and is due to be integrated into Uniswap, which could send volumes stratospheric. 

Already, the amount of liquidity on Sudoswap is clearly and rapidly growing, signaling the platform’s health. Anything that changes how we do things is generally investible, think Facebook, Amazon, Netflix, etc.

Until next time

Disclosure: At the time of writing, the author held several NFTs, ETH, and other cryptocurrencies. Read our trading policy to see how SIMETRI protects its members against insider trading.