FAQs

How does BAL price fluctuation impact the return?

Roughly, the fluctuation of the return is identical to the fluctuation of BAL price.

What about IL (Impermanent Loss)?

We expect the risk of IL to be minimal. The major risk lies in BAL declining in price.

Does any problem arise from providing single-asset liquidity?

Experiments were done on the $1.5M BAL/USDC pool, where two scenarios were carried out: (1) supply 5000 USDC as single-asset liquidity to the pool, and (2) exchange part of the USDC to BAL at the 1inch DEX, then supply both USDC and BAL to the pool. Slippage across (1) and (2) are similar, so we think it won’t be a problem.

How to use perpetual contracts for hedging?

Both perpetual contract and -1x leveraged token could help hedge partially the risk of BAL’s declining price - only partially, because AMM (automated market maker) would “rebalance” when BAL price declines, so for instance if BAL declined by 50%, the pool’s BAL position size would become 1.4x; the -1x leveraged token bought before the decline could only protect the original position, not the additional 40%. There are two ways to address this: (1) use half of the liquidity pooled in our product to buy -1x leveraged token, which would guarantee the protection of the other half, or (2) use ⅓ of the liquidity pooled in our product to buy -1x leveraged token, and readjust the positive size of the -1x leveraged token every week when harvest() is called.

How much fee to take?

The strategy takes 10% (currently set to 5% to encourage early users) of the interest generated as a management fee. Also, a Fair Rate will be charged when withdrawn.
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Outline
How does BAL price fluctuation impact the return?
What about IL (Impermanent Loss)?
Does any problem arise from providing single-asset liquidity?
How to use perpetual contracts for hedging?
How much fee to take?