Some clarification on the differences. We also support the option of single-sided liquidity providing and multi-positioning, but I just did not think it was necessary or appropriate for HOPR given the significant liquidity that is currently in existence.
For another project called ARCx, we managed single-sided liquidity, and once we achieved approximately a 50/50 ratio with ARCx / ETH, we automated rebalances to more or less keep that same ratio.
I would say the risks to this strategy, which we’ve learned in the past, was that removing the DAI (or ETH) portion of the liquidity could increase the sell-side price impact. So sells could lead to greater price impact. I would say having absolutely no sellside liquidity (ETH or DAI) is very risky.
What can happen is if an irrational seller sold into no liquidity, the price impact would be severe, and you could have people placing stink bids (liquidity positions at an extremely low price) to buy HOPR .
I think conservatively speaking, just having some amount of active liquidity management would be good in terms of increasing capital efficiency for when larger volumes start to come in for HOPR. We can even reduce the amount of liquidity at this point and concentrate it within a tighter, actively managed range.
So, the main advantage of using the platforms seems that HOPR can reduce the amount of liquidity on Uniswap and use the capital for something else while maintaining “even better” liquidity for the traders.
Yeah that would be one of the advantages. Another option is that we can keep the liquidity there in a range fairly wide and after more volumes come in, we can concentrate gradually and be responsive to it when it happens. Perhaps this is something that we can cover on Twitter Spaces as well, but it would be interesting to know more about the DAO roadmap. That can sometimes help inform how liquidity can be managed.
Well, I didn’t expect to read such an informative thread when I threw the question. Many thanks to @bp_gamma and @barbarossa_Arrakis for your in-depth clarification. Really appreciated.
@thewanderingeditor will there be a twitter space for such discussion? Looking forward to it:). Thanks.
After reading both proposals I honestly like both, would love to see the community give both a chance to see what they can do. I like the different perspectives each strategy has.
Liquidity amounts in both assets: $5,000,000 (Cells C27 + C31)
Liquidity Ranges: 10% to 1000% (Cells C39, C40)
Trade Size: 10 ETH (Cell F27)
Price Impact on concentrated ranges: 0.36% (Cell F33 & F42)
Price Impact currently on full range: 0.39% (Cell F92 + F106)
Take a look at this spreadsheet here. So there’s currently around $6.7M in liquidity in HOPR/DAI full range position. I think if we removed up to $1.7M in liquidity and just managed $5M in a very conservative range from 10% to 1000%, we’d still have lesser price impact than a full range position. To check the full range price impact currently, input 3,350,000 into cells C27 and C31 and observe cell F92.
That’s $1.7M more you have in your treasury to pay contributors and grow the protocol and less to spend on liquidity.
Unfortunately I will be in and out during the twitter space and can not ask questions there. If you can, could you please answer?
Are there strategies or a proposals in case the current one doesn’t work?
During this current crash Hopr token has been pretty stable. What would you say is the 1 thing Gamma offers to make hopr value even better and what assurances do you have that it wont do the opposite?
One of the things that kept HOPR quite stable is the fact that it was paired with DAI. When you’re paired with a more volatile asset like ETH, the HOPR price will become more correlated with the ETH price. The original proposal was for HOPR/ETH, because pairing with ETH gives you very efficient trade routes given that ETH is the most paired asset on Uniswap. However, it would only be incrementally more inefficient to route trades to DAI/HOPR. I think at this point the community may in fact favor the stability of DAI over the volatility of ETH.
We cannot ensure that people will buy or sell HOPR, but we can ensure that the price impact incurred will be consistent and tailored to the incoming volumes. The active management of concentrated liquidity will allow HOPR to utilize funds for operations and spend less funds in liquidity as well.
Thank you for the detailed proposal. Personally, I like it more specially for the fact that you want to focus on only 1 LP that being HOPR/ETH.
Good luck and all the best.
With respect to this question, yes! We could absolutely do that. It would help spread counterparty risk as well. I think with Arrakis, it should either be done in tandem with Gamma or in tandem with some amount of full range liquidity.
The reason is that they suggested that most of the liquidity would be on the sidelines and a tiny portion would be around the current price. The risks there are that with a certain amount of trade sizes, you’ll have low price impact. However, a large trade size that goes thru the ranges of liquidity without giving Arrakis the opportunity to rebalance in time could send the price soaring up or down out of range. So for that reason, I think that some amount of full range liquidity (or Gamma wide liquidity) should be present to prevent that from happening.