More liquidity with the same trading volume, sure. But right now there isn't enough liquidity for anyone to trade in the first place.
Go try and set up just 1 ETH swap for wHive and look at the price impact. Its currently showing me 6%. So you can't currently trade even 1 ETH before you begin distorting the price.
So, "too much liquidity" is not currently a worry.
More liquidity with the same trading volume, sure. But right now there isn't enough liquidity for anyone to trade in the first place.
Go try and set up just 1 ETH swap for wHive and look at the price impact. Its currently showing me 6%. So you can't currently trade even 1 ETH before you begin distorting the price.
So, "too much liquidity" is not currently a worry.
Hard to say - one one hand your share in fees will drop, on the other the trading volume should increase.