Liquidity Scenarios

We have simulated a few calculations to give you a better understanding of how concentrated liquidity works under constant management, static range, and wide range strategies

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:

1. Static: Deploy and forget. The price range and center are fixed

2. 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.