My Liquidity Position is not Evenly Split Podcast
Why is My Liquidity Position Not Evenly Split Between the Two Tokens?
If you’re wondering, “Why is my liquidity position not evenly split?” it often occurs when your price range is not balanced around the current market price. This imbalance can be influenced by the tick spacing of a pool, which is relative to the fee tier. Here’s an in-depth explanation and additional considerations:
Understanding Tick Spacing and Its Impact
Tick Spacing and Fee Tiers:
- Relative Size: The tick spacing size is determined by the liquidity pool’s fee tier. Higher fee tiers generally have wider tick spacings.
- Impact on Deposits: The amounts required for a balanced deposit will depend on the tick spacing and the current market price of the assets.
Achieving Roughly 50/50 Values:
- Even Tick Spacing: To deposit at approximately equal values (50/50), you need to find two ticks that are evenly spaced around the current market price.
- Example: If the current price of an asset is $1,879, to achieve a balanced deposit with a +/- 1% range, you would aim for price ticks at $1,860 and $1,899. However, due to tick spacing, there may not be ticks at exactly these prices, resulting in an unbalanced deposit.
Example of Tick Spacing Impact
- Current Price: $1,879
- Desired Range: +/- 1%
- Target Prices: $1,860 and $1,899
If the tick spacing does not align perfectly with these target prices, your deposit amounts will not be evenly split. For instance, if the available ticks are at $1,858 and $1,900, the deposits will be skewed.
Additional Tips and Considerations
Understanding Pool Mechanics:
- Pool Specifics: Familiarize yourself with the specific mechanics of the liquidity pool you are using, including tick spacing and fee tiers.
- Current Market Price: Always check the current market price and understand how it relates to the tick spacing within your desired range.
Adjusting Price Range:
- Broader Ranges: Consider setting a slightly broader price range to accommodate the available tick spacing, which can help achieve a more balanced deposit.
- Rebalancing: Regularly monitor and rebalance your liquidity position to maintain an even split as market conditions change.
Tools and Analytics:
- Use Calculators: Utilize tools and calculators that can help you determine the best ticks for your desired price range.
- Platform Insights: Leverage insights and analytics provided by the Goblins platform or other DeFi tools to optimize your liquidity provision strategy.
Strategic Positioning:
- Multiple Positions: Consider creating multiple liquidity positions with different price ranges to mitigate the impact of tick spacing and achieve a more balanced overall portfolio.
- Fee Earnings: Keep an eye on the fees earned from each position and adjust your strategy to maximize returns.
Conclusion
If your liquidity position is not evenly split, it is often due to the tick spacing in relation to the current market price and the chosen price range. By understanding how tick spacing works, using strategic positioning, and leveraging available tools, you can optimize your liquidity deposits on the Goblins Protocol. Regular monitoring and adjustment of your positions will help maintain a balanced and profitable liquidity provision strategy.