Rebalancing Examples

Parameters Setting

Initial Valuation

Rebalancing Case 1

Current Status

Explanation of the Current Figures Status

Within the ETHUSD/USDC pair, the liquidity provided to the Short 0.01% bin has yielded higher returns than the Long 0.01% bin. This suggests that either the Short 0.01% bin generated more trading fees, or traders within this bin incurred higher losses compared to those in the Long 0.01% bin. However, due to significant losses across both bins, the overall valuation declined, thereby leading to a proportionate increase in the Settlement Token Ratio.

Rebalancing Process

Rebalancing is initiated when the current Settlement Token Ratio exceeds the initially established threshold of 20%, surpassing the Rebalancing Threshold. To realign with the original parameters, Settlement Tokens are withdrawn at a rate reflecting 30% of the total pool's value, determined by the absolute difference between the current and targeted Settlement Token Ratios. These tokens are then reallocated to the bins in accordance with the originally set Bin Allocation Ratio, maintaining the vault's intended liquidity distribution.

Status Post-Rebalancing

Current Status

Explanation of the Current Figures Status

In the ETHUSD/USDC market, liquidity providers had higher earnings from the Short 0.01% bin compared to the Long 0.01% bin. This indicates that either the Short 0.01% bin garnered more trading fees than the Long 0.01% bin or traders operating within the Short 0.01% bin faced more significant losses. Both the Long 0.01% bin and the Short 0.01% bin obtained substantial returns from traders. This led to an increased valuation, subsequently causing a relative drop in the Settlement Token Ratio.

Rebalancing Process

Rebalancing is initiated when the current Settlement Token Ratio falls below the initially defined threshold of 20%. In this process, an amount equivalent to 10% of the total pool value, determined by the absolute difference between the current and preset Settlement Token Ratios, is allocated for rebalancing. Liquidity within the bins is withdrawn in accordance with their current ratios and is subsequently converted into Settlement Tokens.

Status Post-Rebalancing

Pool Market Cap: 2,000 USDC
Settlement Token Valuation: 400 USDC(+200USDC)
Bin Valuation(Short): 1,120 USDC(-140 USDC)
Bin Valuation(Long): 480 USDC(-60 USDC)
Post-rebalancing, the total liquidity in the bins is reduced, but the relative distribution between the Long 0.01% and Short 0.01% bins remains unchanged. This suggests that the rebalancing was executed in such a way as to proportionally reduce the liquidity in each bin, ensuring that their ratio in relation to each other is maintained.

Current Status

Explanation of the Current Figures Status

In the ETHUSD/USDC market, the revenue generated by the liquidity provider was higher for the Short 0.01% bin compared to the Long 0.01% bin. This discrepancy suggests that the Short bin either accrued more trading fees or traders experienced higher losses within that bin. Despite this, losses were recorded in both the Long and Short 0.01% bins, leading to a reduction in the overall valuation and, consequently, a proportional rise in the Settlement Token Ratio.

Rebalancing Process

No Rebalancing
Rebalancing is initiated when the current Settlement Token Ratio falls below the initially defined threshold of 20%. In this process, an amount equivalent to 10% of the total pool value, determined by the absolute difference between the current and preset Settlement Token Ratios, is allocated for rebalancing. Liquidity within the bins is withdrawn in accordance with their current ratios and is subsequently converted into Settlement Tokens.

Status Post-Rebalancing

Last updated 3 months ago