Poolshark and Stablecoin Volatility

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This past week, the stablecoin market was affected by the $USDC depeg that will influence stablecoins forever. Today we will discuss how Poolshark can expand the tooling available for self-custody users in black swan events. Let's capture some volatility 🤿📈 🧵 1/19

Psychology is an important aspect in any good trader's toolkit. Looking back at the history of stablecoins and their Price Action post-depeg, there are usually key levels that once crossed are quite difficult to recover from. 🧵 2/19

For $USDC pre-SVB shutdown, that level was 0.98, as we can very clearly see from this chart that level was never crossed once outside of early 2019. 🧵 3/19

Our team's analysis would dictate that Cover Pools would have been a great solution to have during this period of time. 🥶 🦈 The reason is that users can DCA out of $USDC into another asset such as $USDT over some price range. 🧵 4/19

One particular strategy could have been to average out of $USDC into $USDT over the range of 0.98 ▶️ 0.97. In Poolshark, each Cover Pool will handle a certain max volatility that is defined once at pool creation. Let's set that here to 2% max in a single hour. 🧵 5/19

What would happen is.. 1) When the reference price reaches our Cover LP, the liquidity pool would unlock our $USDC liquidity to purchase $USDT from the open market 🔓 🧵 6/19

2) A dutch auction would play out at each price tick in the fashion shown below 🦈 🧵 7/19

3) If we offer a better price than the rest of the market, the Cover Pool price will be brought in line with other liquidity pools. Assuming all order flow is equal, the Cover Pool users will be protected from market downside due to this Dutch Auction. 🧵 8/19

In the case that the market price is initially ahead of the Cover Pool price, the dutch auction will play out over a defined length and produce an effect similar to what is shown below 👀 🧵 9/19

Any unfilled amounts will be returned back to the users reflecting their pro-rata share of the liquidity provided. In this way, Cover Pools hunt for liquidity in the market on behalf of LPs at each Tick and push for best price at all times 🤠 🦈 🧵 10/19

In addition to Cover Pools, Poolshark also offers Price Pools in to serve as a "Take Profit" range strategy. Users could have provided $USDT to purchase $USDC from the market in the range of 0.90 - 0.95 in order to take a buy-and-hold LP position. 🧵 11/19 twitter.com/poolsharks_labs/status/1623381485674954752

The great thing about Price LPs is that the gas cost is fixed no matter how wide the range. Any $USDC that is purchased by the $USDT position is held by the LP. No more reversible trades as is the case with the Uniswap v3 style Range Orders. You are locked in.🔒🦈 🧵 12/19

On the other side of the trader, you would set a Price LP near peg. So... We could set our $USDC sale back into $USDT in the range of 0.98 - 1.00. As that range is crossed, we lock in profits and thus our loop of "Buy Low, Sell High" is complete! 🧵 13/19

Traders have had Take-Profits and Stop-Losses in their toolkit 🧰 for years, and Poolshark brings those tools back in a way that 👇 🧵 14/19

A) Reduces Gas Costs ⛽ Price and Cover LPs are both closed-form solutions, meaning the gas cost does not differ no matter how wide your Range Order is. 🧵 15/19

B) Slashes MEV 🚅 🗡️ All MEV happens near the market price, as this value extracted is by definition static arbitrage. By setting Price and Cover Orders away from the market price, users can avoid getting front-run by nasty bots and searchers. 🧵 16/19

C) Reduces Swap Fees No longer is the user relegated to paying a swap fee to enter/exit their position each time. Assuming all order flow is equal, best price will win out. Ultimately Cover and Price Pools offer different price discovery mechanisms for swappers 🤠 📈 🧵 17/19

We hope you enjoyed this deep dive into how users can leverage the trading tools available in Poolshark. Smash that 'Follow' button if you're excited about our launch and be sure to join our Discord community for all the latest alpha: discord.gg/poolshark 🧵 18/19

Byeeeeeee!!!! 👋 🌊 🧵 19/19

You can read the unrolled version of this thread here: typefully.com/poolsharks_labs/ZRkzkSw