HarmoniQ Strategy
HarmoniQ is a liquidity management strategy designed for correlated and stable pairs.
Overview
HarmoniQ is a liquidity management strategy designed for correlated and stable pairs. It centers liquidity around a defined peg and adjusts gradually as market conditions evolve. By deploying liquidity within a carefully calculated Position Radius, the strategy optimizes fee generation while minimizing risks through deliberate and controlled rebalancing.
Rebalances are triggered when the median peg shifts or when a swap can safely increase the concentration of tokens around the peg. These adjustments are guided by Median Observation, which calculates a median price based on multiple snapshots over a set interval, ensuring the strategy avoids reacting to short-term volatility.
Swaps are executed within a single tick, incurring minimal slippage, and the Max Swap Percentage parameter ensures swaps remain controlled, even in pools with significant external liquidity. This methodical approach allows HarmoniQ to deliver efficient, data-driven liquidity management while maintaining stability and profitability.
The HarmoniQ strategy is designed to maintain liquidity centered around the pool's real-time price (tick) while adjusting dynamically to market changes. Here's how it operates:
Centering Liquidity Around the Peg The strategy begins by calculating a Position Radius around the pool’s peg, which is set by the strategy admin. While the peg often corresponds to the current tick, the admin has the flexibility to define a peg that better reflects the ideal price, particularly in cases of recent price fluctuations. This ensures that liquidity is deployed in the most efficient range, optimizing fee generation while maintaining alignment with the pool’s price dynamics.
Dynamic Rebalancing As the pool’s price (tick) moves over time, the strategy dynamically adjusts. It performs swaps and rebalances to reposition liquidity, ensuring it remains centered around the new tick. This constant rebalancing helps to optimize returns and maintain an ideal liquidity profile.
Median Observation for Stability To avoid reacting to short-term volatility, the strategy takes a specified Number of Observations at regular intervals defined by the Observation Period. For example, if the Number of Observations is 20 and the Observation Period is 1 day, the strategy will take one observation per day and use the most recent 20 observations to calculate the median. This median serves as an anchor point for rebalancing decisions, ensuring adjustments are deliberate and informed by broader trends rather than sharp or temporary price changes.
Controlled Swaps for Efficiency The Max Swap Percentage parameter limits the size of swaps, ensuring that only a controlled portion of the vault's liquidity can be swapped at once. Importantly, swaps in this strategy never move the pool’s active tick—this is a key safety feature. Because the swaps occur within a single tick, they incur minimal slippage, typically averaging within 0.5 ticks. In most cases, the Max Swap Percentage is not triggered, as the amount of liquidity that can be swapped safely is much smaller. However, for pools with significant outside liquidity, this parameter ensures that swaps remain within safe limits, preserving efficiency and keeping liquidity optimally positioned.
Periodic Adjustments for Stability The strategy triggers rebalancing when the median peg has moved or when a rebalance, often involving a swap, can safely increase the concentration of tokens around the peg. This ensures that liquidity remains tightly aligned with the peg, maintaining optimal positioning and efficiency without unnecessary activity.
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