DeFi

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

Also by the way, short and sweet on delta hedging concentrated liquidity positions:

When you open the position, short the volatile token.

For example, if you have a position with $1000 in ETH and $1000 in USDC, you should also short $1000 of ETH.

As you hold the position you should rebalance the amount of ETH in the LP with the short position. This helps minimize losses and allows you to only harvest fees.

Again I think this is silly. If you want delta hedged yield, trade vol! What you should do is stop buying memecoins, and market make them.

Defi. Ethereum. Physics.

Data at @quotient.

Use DefiSaver to automate the rebalancing.

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Use DefiSaver to automate the rebalancing.

https://app.defisaver.com/

I'm been thinking of doing this. How often are you rebalancing?