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Monteluna
@monteluna
Spending some time revisiting the LVR paper, and it does provide a nice framework for hedging concentrated liquidity positions and valuing performance of an LP position. My only issue is, for the majority of crypto users, I don't think they should hedge their positions or use LVR! The paper does discuss this in the Loss-Versus-Benchmark section, I just think the benchmark should be the dollar amount in all of the non-USD token. People should be using Uniswap range orders when they want to go long a token without hedging. - If you want to buy $1000 of a token spot, make a range order with an appropriate range depending on the volatility. 15-25% on both sides of the current price could be an option. - If the position moves up and out of range, you made some money in fees and would be selling as the token moves up. - If the position moves down and out of range, you lost some money, but you lost less than you would have holding the $1000 spot. https://arxiv.org/abs/2208.06046
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Jordan
@jordansaping
Yep, LVR discussions are much more interesting than a lot of other defi discourse imo. It’s an actual problem—money left on the table— that theoretically has a solution, unlike IL which has neither. But where a lot of of LVR chads go wrong is assuming all onchain LPs think about LPing as some professional HFT market maker. Most LPs would be very happy with automatically executing/conditional range orders. The FLAIR paper is a great read as well!
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Monteluna
@monteluna
Yup. I want to take a look at it. I think a tldr of what I'm saying is: 1. Most people that are range order LPs should probably be using options. 2. Most people that are trading spot should probably be using range order LP.
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Jordan
@jordansaping
Def agree on 2. Last cycle when onchain was a bit more vibrant, I LPd in some form or fashion on almost all my trades. The only time it doesn’t make sense is when you don’t want to sit there and watch it, but hooks can fix this now. For #1 is a logical continuation, and it’s cool to think that like if everyone in tradfi had some boutique prime broker it would make most sense all trades to be some ATM option. But perp options for whatever reason seem to be moving sooooo slow
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