SafeMoon’s Liquidity Injection In Action

Two days ago, I wrote the article Learning Decentralized Finance by Example using SafeMoon, which included a screenshot of the SafeMoon liquidity pool then:

I told readers that the SafeMoon “Liquidity Injection”actively devalues the value of SafeMoon, handing that value over to the SafeMoon devs.

Now, some people didn’t believe, so here we can see what SafeMoon’s liquidity pool looks like today:

We can see that there are 800 new BNB added to the liquidity pool, and what’s more, the value of BNB has risen! Despite these facts, both of which would ordinarily mean that the price of SafeMoon should grow by a lot, we see that the price of SafeMoon has actually fallen.

Two days ago, it was valued at $7.6M / 21.8T = 0…35, and today it is valued at 0…32, a ~10% drop in value, even though the number of BNB in the pool has risen, and the value of each BNB has also risen! How can this be?

Well, you can read my previous article to understand, but the short answer is this: the “liquidity injection” half of the SafeMoon protocol takes 5% of each transaction, and it sells half of that (or 2.5%). This sale decreases the value of SafeMoon. This happens regularly, so that the value of SafeMoon continually falls, even when new investors come in! That BNB, now controlled by the SafeMoon Protocol (i.e., the SafeMoon team) is added back to the liquidity pool (which is also controlled by the SafeMoon Protocol).

So the net result is that 5% of each SafeMoon transaction is automatically given to the SafeMoon team. Unless they burn it (they don’t) or redistribute it to the community (they don’t), this means that your transactions directly enrich the SafeMoon team, whether they intended for that or not (they seem like honest people, so I think maybe they just don’t realize how bad the Protocol they designed really is).

Edit 3/30/21: It seems a common response to this from SafeMoon people on Discord is “But but… the LPs ARE LOCKED!”. First, this is only partially true, but even if 100% of the LPs were auto-locked, it would still not be a good response:
(1) the lock doesn’t change the fact that the liquidity injection devalues the SafeMoon, and
(2) even if there is a 4 year lock on the LPs, those LPs still belong to the devs. At the end of 4 years, if this token is still around, the devs will own these LPs. It doesn’t matter if they are doxxed, they already own it. To think that they will suddenly burn all of it or redistribute it to the community at the end of 4 years is wishful thinking.

I analyse cryptocurrencies.