Liquidity Scenarios
Let’s assume the TON/USDT price starts at 6.00 USDT per TON. An LP deploys a position at the center price of $6.00, with a narrow price range of $5.40 to $6.60. If the price goes beyond this range, the LP redeploys the position, adjusting the price boundaries.
Active LP competes with a few other strategies:
Static: Deploy and forget. The price range and center are fixed
Wide-range: Uses a broader price range ($4.80 to $7.20)
The initial value of assets is $1000.
This simulation does not account for LP rewards. It solely focuses on the impermanent loss and value changes of the assets in different scenarios.
Scenario #1: Upwards Momentum
The price increases by 10% twice (to 7.26 USDT per TON), triggering the LP to rebalance once.
• Active LP (Rebalances at 6.60 USDT, setting new range 5.94-7.26 USDT): $1049.40 (+4.94%)
• Static LP (No rebalancing): $1024.40 (+2.44%)
• Wide-range LP: $1050.00 (+5.00%)
The active LP beats the static narrow-range LP, but loses to wide-range strategy.
Scenario #2: Downwards Momentum
The price decreases by 10% twice (to 4.86 USDT per TON), triggering the LP to rebalance once.
• Active LP (Rebalances at 5.40 USDT, setting new range 4.86-5.94 USDT): $867.28 (-13.27%)
• Static LP (No rebalancing): $846.62 (-15.34%)
• Wide-range LP: $867.77 (-13.22%)
The active LP loses less than the static LP, but is still outperformed by wide-range LP.
Scenario #3: Oscillations
Price moves up to 6.60 USDT and then back to 6.00 USDT
• Active LP (Rebalances once at 6.60 USDT): $954.00 (-4.6%)
• Static LP (No rebalancing): $1000.00 (0.0%)
• Wide-range LP: $1000.00 (0.0%)
In this scenario, the active LP strategy results in a permanent loss, while the static and wide-range LP strategies maintain the initial asset value.
This simulation highlights the importance of choosing the right liquidity strategy based on market conditions and personal risk tolerance.
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