Risks: Medium. Impermanent loss, risk of a protocol's exploit.
How we hedge risks: Reinvesting rewards to compensate for imbalances caused by impermanent loss + thorough research and risk assessment of underlying protocols and their vulnerabilities.
Concentrated liquidity provider for Uniswap V3
Providing concentrated liquidity for two assets in a chosen price range (eg. ±5%). The smaller the price range, the more fees that are earned. If the price goes beyond the custom range, the liquidity is swapped to the asset.
Available assets: CVX, SPELL, TOKE, JOE, BOO, SPIRIT, TAROT
Annualized Percentage Rate (APR): 20% – 60% APR
Protocols/Blockchain: Uniswap V3; Ethereum
Risks: Medium. The extensive growth of one asset will lead to decreased amount of target assets (impermanent loss).
How we hedge risks: Self-collateralization through lending target assets and liquidity. It decreases return by 30% but negates the main risk.
Asset+Stable liquidity provider to hedge from market pullbacks
Combining assets with USDT or any other stable allows earning more assets during market pullbacks due to impermanent loss. This increases the asset amount. Additionally, asset+stable liquidity pools are hardly incentivized by protocols since it is one of the most used trading pairs.