How does auto rebalance work?
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h
hyang926@gmail.com
May I ask what is the mechanism of the pool's auto rebalance? Do you have a document to give us more details? Could you demo the concept ranging from min $80 - max $120 with $100 pool position? What would happen if the crypto drops below $80 or rise above $120? What would happen to my $100 in the pool? I wonder if the price drops below the range, would the "impermanent loss" be actually becoming a permanent loss?
vfat portfolio manager
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vfat portfolio manager
In concentrated liquidity when you are out of range you end up with just one asset, so for example in an ETH/USDC pool you end up with just ETH if ETH price drops. Rebalancing then would sell half your ETH for USDC and add liquidity again. This move would be good if ETH price continues to drop (because you sold some before it drops), and bad if ETH price starts to rise (because you locked in your impermanent loss).
h
hyang926@gmail.com
vfat portfolio manager Thanks for your explanation. So locking in "impermanent loss" would only occur when the price drops below the min$ and then rise up afterwards? How about the scenario when the price goes beyond the max$?
vfat portfolio manager
hyang926@gmail.com The same thing applies, rebalance is good if the price keeps going up, but bad if it changes direction.
h
hyang926@gmail.com
vfat portfolio manager I see. Thanks for your explanation. BTW, whenever the price is beyond the preset range, it will trigger auo rebalance and as a result this action charges fees. Is there a place we can view the amount of the fees charged for each auto rebalance?
vfat portfolio manager
hyang926@gmail.com There is no way to view historical fees charged yet but keep in mind the fees are very small, by far the main cost of rebalance is the possibility of impermanent loss.
h
hyang926@gmail.com
vfat portfolio manager I see. Thanks for your explanation. I did see during last sharp drop of ETH, I seem lost a lot of my rewards. I initially thought it's the fees, yet now it sounds like the realization of I.L. Would I be better off without setting the auto rebalance?
I entered ovn/usd+ pool right before ovn fell off the cliff, I had not set the prince range neither set auto rebalance. In this scenario, the default setting would be 50/50 of the pair no matter what price ovn is?
vfat portfolio manager
hyang926@gmail.com: OVN/USD+ is a CPAMM pool (Uniswap V2), not CL. It is always split 50/50 as you said yes, and there is no concept of rebalancing there.
h
hyang926@gmail.com
vfat portfolio manager Concentrated Liquidity Market Maker (CLMM) pools vs Constant Product Automated Market Maker (CPAMM), which is used by Uniswap. Thanks a lot. There's so much to learn in this arena.
I also tried to understand how auto-harvest feature works. I read your doc at https://docs.vfat.io/automation/harvest/
However, it does not seem tell me if my chosen token USDC would be returned to my wallet or re-invest (like stock's dividend drip) to my existing OVN/USD+ pool when it reaches $50.
Since I forgot to make a screenshot before the reward reaches $50, I could not tell if the rewards reinvested... Anywhere to track where did the reward go?