RE: SPS Governance Proposal - Restructuring DAO LPs
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Thanks for the reply and trying to explain.
It sounds like the swap math completely changes above the limit, I’m curious how the LP continues to price both tokens once it keeps selling DEC at soft peg and it can’t keep both assets in equilibrium balance anymore?
Say we have $100 in each asset at peg.
Dec increases and someone buys $25 in DEC - normally that would push the LP’ DEC price up to equilibrium but you are saying that doesn’t happen - instead the LP keeps $25 of DEC at peg and $125 of USDC. I’m just guessing either it keeps buying/selling both assets at the limit price, or maybe the pool shrinks automatically (withdrawing USDC proportionally)
How does the LP revert back from the 125/25 imbalance when Dec demand abates and people start selling back into the pool at soft peg?
https://debank.com/profile/0xdf5Fd6B21E0E7aC559B41Cf2597126B3714f432C
You can check the pool in question at the link. #1250953
What happens is it only has one token when it goes beyond that range. This actually happened with the other DEC:USDC pool when DEC fell below peg. We had a position with millions of DEC and no USDC. In short, it could only sell DEC, not buy.
We have a pull that can only buy DEC (for 0.00083) right now. It has no DEC to sell.
Having a pool from 0-0.00101 means that it has liquidity to buy or sell DEC all the way up to 1% over peg, then it can only buy DEC. You end up with 200k buy pressure which makes it harder to drop far from peg.
Good context and appreciate your time explaining. Looks like I have some more learning to do :)