Fixed Range
Market Make with no rebalancing
Market Make with no rebalancing
The Fixed Range strategy enables you to provide liquidity into a specified range, and earn auto-compounded fees & rewards while in range.
Liquidity providers select a range into which they want to provide liquidity. Once the vault is created, they can deposit their liquidity. As long as the pool price remains within the specified ranges, the position will earn auto-compounded DEX fees. The position will also earn DEX rewards, should there be any incentives on the DEX pool (this is automatically factored into the APY/earnings).
The specified range will stay the same unless manually adjusted by the vault creator. No rebalancing is performed in any scenario, regardless of whether the price is in range or not. Thus, no impermanent loss is realized via automated rebalancing.
If the price goes out of range, the position will stop earning unless the price comes back into range, or you manually adjust the ranges and trigger a rebalance.
Note that manually changing the ranges will realize any impermanent loss incurred up to that point.
Asymmetric range widths are supported for fixed range strategies. For example, you can set ranges to 50% below, and 500% above the current price.
With fixed range, liquidity is provided in a specified range. If you expect SOL to remain in this range, this strategy is effective at capturing trading fees, while not realizing impermanent loss via rebalancing.
You expect SOL to trade between $20 and $30. You create a SOL-USDC strategy, and set a lower range of $20 and an upper range of $30. If SOL is trading at $25, the asset ratio will be 50/50. If SOL moves to $32, the asset ratio will be 0/100 (100% USDC). At this point, the strategy no longer earns trading fees, as the liquidity provided is not in the selected price range.
Even when it goes out of range, the fixed range strategy will not rebalance. If the SOL price returns to the $20-$30 range, the position once again earns trading fees.
With a fixed-range strategy, the LP prioritizes market-making only at the specified price range. In contrast, in a Tracker strategy, the LP prioritizes continuous market-making regardless of price.
