Proposal Title: Partner with Gamma Strategies on Treasury Management
Hi BitDAO Community!
I’m Brian from Gamma Strategies, which is an active liquidity manager on Uniswap v3. This proposal is an opportunity for a partnership between BitDAO and Gamma Strategies to generate yield on ETH, FTT, and USDC by providing these assets as liquidity on Uniswap v3 via the strategies developed by Gamma Strategies.
What is Gamma Strategies?
Gamma is an active liquidity manager on concentrated liquidity DEXs such as Uniswap v3, with plans to actively manage liquidity on Sushi Trident and Shell Protocol as well. We are utilizing machine learning algorithms to dynamically predict optimal price ranges for providing liquidity to a specific pair.
Our top-of-the-line strategy is an Autoregressive GARCH mode (
https://github.com/GammaStrategies/active-strategy-framework/blob/main/2_AutoRegressive_Strategy_Example.ipynb), which predicts price movements and dynamically broadens liquidity ranges to mitigate impermanent loss by reducing the concentration of liquidity. During periods of low volatility, the liquidity ranges narrow in width to take advantage of a higher swap fee multiplier. Additionally, the algorithm uses mean reversion to predictively place liquidity bands in the direction that the model expects price to go.
We are currently managing liquidity for over 40 liquidity pairs on behalf of public LPs but manage over 10 liquidity pairs on behalf of DAOs and institutional investors.
What is the Earning Potential?
To determine earnings, we look at the Fees / TVL ratio as a metric to determine profitability. Based on BitDAO’s treasury of assets, we’ve determined that the best pairs to deploy liquidity would be for the 0.3% FTT-ETH pool and the 0.05% ETH-USDC pool. I will summarize our backtesting results for $4 million of liquidity invested in each pool for Q4’2021 below, but feel free to read the full reports here:
0.05% ETH-USDC Highlights:
- Net return of 15.23% over a period of 91 days for an annualized return of 61%
- The LP position of $2M of USDC and $2M of ETH outperformed holding the two assets by 6.2% over a period of 91 days, for an annualized outperformance of 24.8%
0.3% FTT-ETH Highlights:
- Although the Net Return was strongly mitigated by the downward price action of FTT / ETH in Q4, the LP position vastly outperformed simply holding FTT & ETH by 10.27%, for an annualized outperformance of 41.08%
(see charts in the link above - was only able to embed one media image)
The management of liquidity would take place through our position manager contracts called the Hypervisor
The Hypervisor contract manages both a base position and limit position at all times and as such, we maintain higher profitability due to not incurring the swap fees upon rebalancing price ranges.
Only the DAO’s multisig address provided will have the right to withdraw assets from the Hypervisor once deposited into the Hypervisor contract. The position manager contract has the right to a few functions which are to set liquidity ranges and to re-invest earned fees. The Hypervisor contract is non-custodial in that only the whitelisted address may withdraw assets from the Hypervisor. In that sense, this process is a lot more secure from external risks (such as flashloan attacks) which involve other parties depositing and withdrawing from the same position manager contract.
In terms of the business model, Gamma collects 10% of the fees returned from the position and distributes that to its stakers. 90% of the fees returned are re-invested back into BitDAO’s LP positions.
- Deploy $4 million of liquidity to the 0.3% FTT-ETH pool on Uniswap v3
- Deploy $4 million of liquidity to the 0.05% ETH-USDC pool on Uniswap v3
Please let us know what you think of our proposal and ask us any questions! We’re happy to delve into more details.