I'm trying to calculate the price impact on trades and am getting strange results.
I am using uniswap v2 subgraph to get current data for WETH/USDC.
def loadUni2():
query = """
{
pairs (
first: 10
orderBy: volumeUSD
orderDirection:desc
){
id
reserve0
token0Price
token0 {
id
symbol
decimals
}
token1Price
reserve1
token1{
id
symbol
decimals
}
}
}
"""
I then save the results of this query into individual variables and do the same math for the "constant product formula" that uniswap says it uses for its pools
pair = pairs[0]
#sort dataframe by lowest price
low = pair.sort_values(by='token0Price', ascending=True)
quoteReserve = low['reserve0'].values[0] #USDC Tokens in pair verified by checking info.uniswap.org
baseReserve = low['reserve1'].values[0] #WETH tokens in pair verified by checking info.uniswap.org
token0Price = low['token0Price'].values[0]
token1Price = low['token1Price'].values[0]
#Buy Low
amount = 1 # purchase amount in USD
constant = quoteReserve * baseReserve
newReserve = (quoteReserve + amount)
output = constant / newReserve
wethPurchaseAmount = baseReserve - output
pricePerToken = amount / wethPurchaseAmount
if (newReserve * output) == constant:
check = True
print(f'Token0Price before trade : {token0Price}')
print(f'Token1Price before trade: {token1Price}')
print(f'Quote Reserves: {quoteReserve}')
print(f'Base Reserves: {baseReserve}')
print(f'Constant: {constant}')
print(f'New Reserve: {newReserve}')
print(f'Output: {output}')
print(f'WETH Purchased Amount: {wethPurchaseAmount}')
print(f'Price paid Per Token : {pricePerToken}')
print(check)
Since my amount is only $1 the price paid per token should match the token0Price. But my results look like:
Token0Price : 1942.4506384054528
Token1Price: 0.0005148135969215
Quote Reserves: 121784650.548786
Base Reserves: 105869.64875708237
Constant: 12893298177603.992
New Reserve: 121784651.548786
Output: 105869.64788776389
WETH Purchased Amount: 0.0008693184790899977
Price Per Token: 1150.3264040203076
True
I'm either missing something or somehow my math is wrong? Any suggestions/ideas would be greatly appreciated.
Here's the link for where I found an example of the Constant Product Formula
Also, the only imports I have are 'requests' and 'pandas' Running it in a google collab notebook.
I apologize in advance if this is hard to read, I'm completely new to this.
you are not including the 0.3% percent fee which affects the amount of return value. initially we have "x" and "y" amount so constant product is
k = x * y
There is an inverse relationship between x and y because increase in one will lead to decrease on other
this is our graph for this equation
If you add some "x" token, the amount of "y" token will decrease, but "k" is constant in everwhere on the graph
k = (x+dx) * (y-dy)
xy = (x+dx) * (y-dy)
If you multiply right side parantheses:
xy = xy - xdy + ydx -dydx
xy
cancels out
0=ydx - xdy - dydx
I am looking for dy
so
xdy + dydx = ydx
dy(x+dx)=ydx
leave dy
alone
dy = ydx / (x+dx)
So far we have been swapping "x" token to receive "y" token and we are calculating how much "y" tokens will be decreased from the pool. When we swap "x" token we also have to pay 0.3% fee which is 0.3% "x" token. "dx" here amount that we are sending to swap, since 0.3% of this amount will be taken, we will be actually swapping
(1 - 0.3%) dx
(1 - (0.3/100)) dx
(1 - (0.003))dx
0.997 dx
this is total amount of "x" token that we are actually swapping. Our final formula will be
dy = y *(0.997dx) / (x + 0.997dx)
this is how you should calculate the weth purchase amount.