Automatic LP position management options

Ideas
1

Hello StakeWise community!

Motivation

Given the previous proposal about liquidity pools for sETH2/ETH and rETH2/ETH on Uniswap V3. I think it’s fair that we start discussing a few things!

Uniswap’s V3 liquidity positions

As some if not most of you might know, Uniswap V3 has a new, very sophisticated LP system, where one can provide liquidity within a range and gain more fees depending on your contribution to the liquidity in that range.

For example, if ETH is 2600 USD, you can specifically set your liquidity in the 2600 USDC / 1 ETH to 2620 USDC / 1 ETH range, thereby increasing your LP fees as long as the pair remains in this range.

Meaning, if you are providing 10% of the liquidity of the USDC/ETH pair in the range 2600-2620 USDC per 1 ETH, you will earn 10% of the fees as long as USDC/ETH remains in this range. Once it’s out of this range, you will stop earning fees from the pool.

Here’s an example of the USDC/ETH pool from the Uniswap analytics page:

usdceth
usdceth1784×949 85.9 KB

The red bar is where the pool is trading at the time of making this post.

If you want more information on the matter, you can check their blog post on V3.

LP position management

This all means that being a LP requires active management of your liquidity, as a result, several new projects have come to offer the option of active liquidity management on behalf of users.

A few I’ve found by casually searching the web:

Discussion

There’s a few things I think we should discuss:

  1. Well… Automated LP management options. If anyone finds anything cool/trustworthy/battle tested/solid that they want to propose that offers this, please do so!

  2. If there’s anything right/wrong with the options in this thread, discuss those as well.

  3. It is obviously not necessary for StakeWise to pool SWISE liquidity in the same platform sETH2/ETH and rETH2/ETH liquidity are pooled, however, I do think that eventually this should be the goal, therefore, I want to discuss the option of eventually creating an SWISE/ETH pool in Uniswap V3, as to incentivi. This only after exploring some liquidity management options.

o/

4 Likes
2

There is this new thing by peanut.finance, called “Liquidity Balancer”. It hasn’t launched yet, but was showcased on Youtube and DataDash talked about it. Looked very impressive:

2 Likes
3

This is a great post - you certainly are one step ahead of what we need to do!

Automated LP position management tools like ones you linked above are likely a necessity for the pools that would be a part of our proposed integration strategy, i.e. sETH2 paired with a stable coin, FLI-2xETH, WBTC etc. In all of them, volatility is likely to be high, leaving those who would want to LP at the risk of impermanent loss, positions becoming inactive, and lower than expected trading fees. Automated solutions would help optimize the management of liquidity positions for the users, thus enabling mostly anyone to benefit from the handsome fees, and in turn support trading in sETH2.

On our side, there is ongoing to work to analyze the tech behind each of the linked solutions to identify the best fit for StakeWise. We will keep you updated on our progress!

1 Like
4

I saw this one, I had forgotten about it. Called my attention 'cause their site is seriously pretty.

Lemme add it to the main thread

Awesome \o/

5

Yea, I thought so too. Their web designers have some serious skills :slight_smile: Let’s find out if the product itself is just as good.

1 Like
6

This is a very good idea.

Operating individually with the Uniswap V3 sETH2/ETH pool is a pain since we need to figure out the optimal range and also manage the positions which implies collecting (and reinvesting) fees and reposition in a different range when necessary.

To explore this option we need to study those new automators, design a simple strategy to automate the repositioning, etc…And finally reach an agreement with the protocol to create a sETH2/ETH vault.

Besides Visor, Charm and the others mentioned there is also Gelato G-UNI. Another one is Mellow but still in development.

Once done, the advantage would be to simply buy into the ERC20 representing the vault to optimize LPing and professionally managing repositioning should help to maintain the peg too.
Then, if everything is working fine, we could look for DeFi integrations of this ERC20 vault token with lending protocols, etc.

Any user of this automators or with knowledge to design a repositioning strategy for the vault?

1 Like
7

Great proposal, I would just like to stress out to that we should also start thinking about SWISE liquidity…this is still a huge gap that we are not addressing. So it would be great to keep SWISE/SETH2 pool in consideration

2 Likes