Gamma Public CLM
An overview of Gamma's public suite for actively managed concentrated liquidity pools
Introduction
With the introduction of concentrated liquidity on Uniswap V3, Sushi Trident, and other platforms, a need has arisen for concentrated liquidity managers (CLMs).
Gamma's technology stack can offer non-custodial, automated, concentrated liquidity management services to the public.
Gamma Public CLM is non-custodial and can adapt new strategies without migration. Gamma Public CLM also includes a dedicated analytics user interface to provide critical data, statistics, and charts for the user.
Concentrated Liquidity
Providing liquidity to concentrated liquidity platforms is significantly more difficult because liquidity providers are required to provide liquidity at set price ranges, so if the price of the underlying asset moves outside of the set price range, the LP no longer earns fees without re-adjusting the price ranges.
Concentated liquidity in action at Uniswap V3
For example, if a user provides liquidity for the ETH-USDT pair at a price range between $2,500 - $3,000, and the price of ETH rises above $3,000, the user will no longer earn fees. Additionally, fees earned from providing liquidity are not automatically re-invested, and the user is exposed to impermanent loss.
The narrower the range that liquidity is provided, the greater the capital efficiency and the greater the yields that may be earned by the LP. But, these tight ranges come with increased risk (impermanent loss)
Active Management
Gamma's Supervisor contacts (Hypervisor + input strategies), automatically manage the price ranges, rebalances assets, and re-invests earned fees to generate yields in an optimal fashion. This approach is superior to a passive LP option.
Active management of the LQTY-WETH Hypervisor. The dark grey bars represent the ranges being set.
Deposit Options
Gamma Public CLM deposits are dual-sided. Users deposit assets directly in proportion to the asests in the pool.
Withdrawal Options
Gamma Public CLM withdrawals are dual-sided. Users will receive assets directly in proportion to the assets in the pool regardless of what the user originally deposited.
Fee Mechanics
The Annual Percentage Returns (APRs) on the dashboard refer strictly to fee-based APR, which is total fees earned as of the last rebalance divided by the current value of assets. The APRs currently do not reflect impermanent losses or the change in valuations of the underlying assets.
Fees generated by a pool
Fees are auto-compounded in pools for greater returns and efficiency on rebalances. This is also when the 10% fees are taken and provided to GAMMA stakers via the "Swap" contract. Rebalances also "lock-in" any impermanent loss suffered from the asset price changes.
Here is an example of a rebalance on the Liquity (LQTY-WETH) Hypervisor::
Rebalance in action
The red box indicates the position + accrued fees, the blue box indicates the Swap contract removing the 10% fees for VISR stakers, and the green box indicates the deposit of a new rebalanced position.
Impermanent Loss
Impermanent loss is the primary enemy of concentrated liquidity management and of Gamma.
Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.
Liquidity pools that contain assets that remain in a relatively small price range will be less exposed to impermanent loss. Stablecoins or different wrapped versions of a coin, for example, will stay in a relatively contained price range. These pools will generate fewer fees, though.
Concentrated liquidity platforms have significantly better capital efficiency and fee production, but they also can amplify the effects of impermanent loss.
Gamma's Supervisors attempt to mitigate impermanent loss through smart rebalancing, anticipating market conditions, evaluating metrics, and more.
Deposit Caps
There is currently a $100,000 deposit cap on every pair. Multiple deposits can be made on each pair though.
Analytics
An updated analytics dashboard is currently being rolled out for Gamma Public LPs. You can also use Zapper.fi to evaluate your vault and staking holdings.
Listing Criteria
Gamma Public Liquidity Pools have basic listing criteria to avoid unnecessary risks.
The list of considerations are:
Criteria
Ideal Situation
The average return for the past X days
Higher average returns
Return Interval
More frequent returns
Total value locked (TVL) in pair
Higher TVL
Fee tier
Fee tier with the best volume
Pair date of inception
Older date
Amount of trades
Higher number of trades
Total fees generated
Higher fees generated
Trading volume
Higher trading volume
Fees/TVL
Higher ratio
% of Pair Vol in Tier
More allocation per tier
Number of Trades
Higher number of trades
Change in Volume
More consistent volume
Change in USD value of TVL
More consistent value
Last modified 16h ago