SMM Strategy

Stable Coin Market Maker (SMM) strategy description

How it works

In our Stable Coin Market Maker (SMM) strategy, we provide liquidity in a pool with precision and a minimal commission of 0.01%, specifically tailored for stablecoin pools. Our approach centers around achieving highly accurate positions, with a minimum tick width (tick spacing) of 1. This level of precision allows us to position liquidity very close to the current price without becoming part of it, enabling us to capitalize on even the smallest price fluctuations.

Here's how our SMM strategy functions:

  1. Precision Positioning: We place liquidity very close to the current price, both to the left and right, depending on the assets available.

  2. Waiting for Price Shifts: We patiently wait for price movements in one direction. As soon as the price shifts and intersects with our positioned liquidity, we obtain additional assets, which may be different stablecoins like USDC or USDT, depending on the pool.

  3. Following the Price: After the price moves beyond our initial position, we adjust our liquidity to follow the price. For example, if the price starts at 1.0008, we initially place our position at 1.0007 and 1.0009. If price moves to the center (1.0000), it consumes our position at 1.0007 and we keep another position close (to 1.0008). When price at 1.0006, we have only 1 asset and our position at 1.0007 (combined of two)

  4. Managing Two Assets: If we initially have two different assets, we position them on both sides of the price. When the price shifts in one direction and consumes one of our positions, we are left with one asset. In response, we change our entire position to follow the price. One of the positions remains in place, while the other is shifted.

  5. Gaining Two Assets: We regain two assets only when part of our position is consumed, and the price reverses direction. For instance, if the price starts at 1.000 and we initially position everything at 0.999, and the price moves towards it, we undergo exchanges. When the price returns to 1, we regain both the first and second asset due to the exchanges. We then proceed to place a new position at 1.001.

Important Restrictions and Considerations

Price Depegging: In cases where a stablecoin's price volatile significantly, we adjust our position to follow the price. For instance, if a stablecoin like USDC depegs to 0.82, we would continue following the price, using only USDT. When the price reaches 0.82, we conduct an exchange and that will lead to losses.

To manage risk and potential losses, we have implemented a Price Movement Limit: This restriction prevents us from moving too far from the current price, specifically stopping our movement when the price exceeds 0.06% from the current price. If the price rebounds, we move back to 1. This dual strategy helps safeguard against substantial losses while navigating price-depeging scenarios.

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