Leverj Gluon Price Analysis- Layer 2 token supports growing derivatives exchange

By January 22, 2021DApps
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Leverj Gluon (L2) is the native token that powers the Leverj exchange and Gluon layer 2 ecosystem. Leverj is a decentralized digital asset derivative and spot trading platform. The exchange was built in 2017 in response to the lack of cryptocurrency exchanges that could perform like a traditional financial exchange while maintaining critical functions of privacy and self-custody.

Leverj is built on top of Gluon, a game-changing layer 2 solution purpose-built for high-frequency trading that is designed to offer a solution to Ethereum’s congestion and gas scaling issues. Gluon is an account-based layer 2 that has been through multiple external audits and testing rounds. Trading with Gluon offers a sub-second settlement, minimal gas fees, and withdrawals/deposits can be finalized within 30 minutes. Average Ethereum transaction prices have retreated a little from their record high of more than US$16 on January 11 but still remain high, at around US$3.

Gluon is a side-chain based specification built to deploy hybrid centralized/decentralized applications for non-custodial, low-latency trading at high speed. It is differentiated from UTXO payment based sidechain like Plasma MVP and Plasma Cash. The account-based model eliminates some of the problems associated with UTXO based plasma sidechain solutions like bloated transactions, long delays, and shredding.

The Gluon contract also accepts fraud-proofs and enforces correctness. Any submitted proof of operator misconduct or compromise will lead to the instant automatic suspension of side-chain operations and enables users to withdraw funds. Data unavailability is similarly enforced by the on-chain contract. Fraud proofs help to provide a shield against classic DEX issues like frontrunning.

Potential drawbacks of a Gluon based layer 2 solution is partial centralization because the sidechain operates with a centralized consensus model. There is also a high liveness requirement for validators on the sidechain, with every block requiring an honest validator.

Gluon was originally created for the sole purpose of powering the Leverj exchange, but due to the general industry demand for viable Ethereum scaling solutions, the project has expanded its scope to allow for any DeFi protocol or decentralized application to utilize its scaling technology.

The exchange went live with high-speed decentralized spot trading on the Ethereum (ETH) mainnet in 2019. In late 2020 the exchange added tradeable futures to its product offering, releasing ETH/USD and BTC/USD perpetual contracts. These are tradeable with up to 100x leverage and are settled in USDT. The derivative products were released to much fanfare. In the four weeks following the launch of the perpetual contracts, users made 26,612 trades for them, this resulted in a notional volume of USD74.5 million, with the traders paid just USD586.48 in gas fees to trade them.

On January 18th, Leverj launched a three-pronged user interface update. The update includes a new asset selection tab and search functionality, an improved layout on its trading page, and a new wallet page.

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The Leverj Gluon (L2) token’s core tokenomics are based on distributing collected trading fees from the Leverj exchange to holders who take tokens. A simple value proposition is offered, where if the exchange is popular and generates more traffic, staking rewards are deployed natively on the Ethereum blockchain but there are plans to distribute on the Gluon sidechain in the future.

Rewards to stakers are distributed every 30 days. Individual rewards are based on how much L2 a holder stakes relative to the total L2 in the primary staking contract. Since the announcement of the successful perpetual product launch campaign and accompanying trading competition, the price of the L2 token has surged - and is up ~95% in the last seven days.

Beyond staking rewards, L2 tokens will be used to offer trading rewards to bootstrap liquidity. Similar to liquidity mining there will be a weekly distribution of tokens based on volume traded. Additionally, a portion of the 60 million tokens set aside for liquidity incentives will be paid to market makers over a three year period to bring base liquidity to key trading pairs.

There will also be 35 million tokens set aside for Ecosystem Growth, Bounties, Grants and Node Validators. The Leverj development team have also built a governance framework that allows voting on proposals.

Ethereum co-founder Vitalik Buterin has said that layer 2 is now the roadmap for Ethereum as “gas prices on eth1 are climbing to new highs, to the point where some non-financial dapps are being forced to shut down and others are running on testnets”. Layer 2 based solutions aren’t built on the same interoperable standards that layer 1 systems standards are. Their native tokens offer a best of both world’s proposition, permitting the networks they are built to meet market demand, yet still able to leverage on the network effects of the underlying blockchains..

Peripheral solutions that are designed to make Ethereum and its DeFi space more operable and can work as money lego to extend capabilities like scalability, are tied to the success of the blockchain. The price of Ethereum price has risen ~68% year-to-date and touched new all-time-highs on January 20th.

Leverj may also benefit from the positive momentum generated from the growing popularity of synthetic blockchain smart contract based derivatives. Jack Purdy, an analyst at crypto research firm Messari says the sector is poised to grow. “The first wave of DeFi projects laid the groundwork for the plain vanilla lending/exchange but as the market matures more complex products will be needed to meet investors needs.” L2 was recently featured on a list of projects that the Messsari research team are following.

2020 was a breakout year for crypto derivatives on centralized exchanges. Both options and futures products hit staggering volumes and open interest on exchanges like Binance, CME and Deribit. This bodes well for the product category and 2021 may be the year that decentralized exchanges begin taking a larger piece of the market. Decentralized exchanges offer some core advantages over their centralized counterparts like stronger security, customer control of funds, improved privacy and greater financial inclusiveness.

The Leverj Gluon token smart contract address has seen a surge in activity since the start of the year. There has been a pickup across unique senders, unique recipients, transfer count and quantity of tokens transferred, suggesting that onchain interest in the token and its functions like staking is gaining momentum.

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Source: Etherscan

The most popular platform to trade L2 tokens is Uniswap which uses liquidity pools. Pools for each of the Uniswap ERC-20 tokens sit in smart contracts. Liquidity for these tokens comes from Uniswap’s community of users. If there is enough of a specific token, the user may be able to exchange any of them with one another using ETH as a medium. The total liquidity offered by Uniswap’s community to the L2/ETH pool has grown steadily over the last month.

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Source: Uniswap.info

There has also been a sharp pickup in trading volume of the L2/ETH pair on Uniswap this year. On January 17th there was a USD1,083,864 trading volume record between the pair.

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Source: Uniswap.info

Technicals

The L2/ETH pair on Uniswap is too new to garner any significantly meaningful technical analysis. However, low time frame charts can be used to aid trading pairs of this type. To determine entries and exits throughout a trend, as well as the potential for a trend reversal, Exponential Moving Averages, Volume Profile of the Visible Range, pivot points, and the Ichimoku Cloud can be used. Further background information on the technical analysis discussed below can be found here.

On the four-hour chart, price has mainly held below the 50-period EMA since trading history began in October 2020. Over the past few weeks, price has broken above the 50-period EMA and will potentially have a bullish 50/200 EMA cross on this timeframe over the next few days. VPVR and monthly pivots show significant resistance at 0.000090 and support in the 0.000050 zone. Further upside resistance sits at 0.00011 with support at 0.000030, based on monthly pivots. RSI will need more trading history before any meaningful interpretations can be made.

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Turning to the Ichimoku Cloud, there are four key metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.

Four-hour Cloud metrics, with doubled settings (20/60/120/30), are neutral to bullish; the spot price is above the Cloud, the Cloud is bullish, the TK cross is bearish, and the Lagging Span is above the Cloud and above the spot price. The trend will remain bullish so long as the spot price remains above the Cloud.

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Conclusion

Levej Gluon is part of a new wave of altcoin projects set to emerge in 2021, that break new ground and offer solutions for the classic blockchain problems of scaling and decentralized trading. Perpetual contracts that are settled without centralized financial middlemen have not yet emerged in the crypto trading zeitgeist, perhaps because of issues like latency and sizable blockchain based transaction times. The eye catching numbers evidenced from Leverj’s first month of offering them, however, indicates there is a growing appetite for them.

The L2 token lets you buy a stake (and get rewarded) for a product that is already generating fees revenue. With Gluon now offered as a universal scaling solution for any DeFi builder looking to scale on Ethereum, and governance rights set to be offered, the value proposition of the token looks set to grow.

Technicals for the L2/ETH pair on Uniswap show a newly listed and illiquid pair with a nascent bullish trend on low timeframes. VPVR suggests the current trading range is roughly 0.00005 to 0.00008 with most of the historic volume in this range. Monthly pivots show upside resistance at 0.0007 and 0.0001 with support at 0.00002.

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