Strategy Details

AutoRouter supports 3 types of strategies

  1. Active Strategy

  2. Passive Strategy

  3. Pegged Strategy

Active Strategy

AutoRouter brings it's proprietary quantitative strategies on-chain and opens up access to all users with it's Active Vaults. An Active strategy creates positions in a Narrow AutoRouter and constantly monitors the price action to trigger rebalances and aims to reduce the Impermanent Loss while achieving high fees.

Some key features about active strategy :

  1. Narrow price ranges that maximize the trading fee earned

  2. Impermanent loss mitigated by rebalancing the portfolio to maintain the exposure of the base token every time a position goes out of range

  3. All interactions are automated and prices are constantly monitored every few seconds across different avenues.

  4. Passive windows during high volatility periods to reduce Impermanent loss and toxic flow

  5. Rebalances for high slippage pools are optimized with Just-in-Time Liquidity resulting in swaps with 0 slippage

Active strategy is suitable for investors for a slightly higher risk appetite (in terms of Impermanent Loss) and generally expects higher returns.

Passive Strategy

With Passive strategy, the vault provides the assets in a wide range around the current price. The position is expected to stay within range for a long time. The vault manager may choose to do rebalancing depending on market conditions.

Passive strategy is suitable for investors with a low risk profile.

Pegged Strategy

Pegged strategy is applicable for pairs that have a strong correlation in their price. These can be:

  1. Hard-pegged like USDT-USDC where assets are supposed to be redeemable 1:1 and have minor fluctuations based on market factors

  2. Soft-pegged like wstETH-ETH where assets are correlated based on external factors, in this case validator yield and the prices follow a deterministic path + variation depending on market

For hard-pegged pairs, the pegged strategy tries to provide liquidity in a narrow range. If the price goes out of range, the strategy expects the price to mean-revert and does not rebalance. If the price stays out of range for too long, the strategy manager can choose to move the range around the current price based on market conditions.

For soft-pegged pairs like wstETH-ETH, the strategy tries to actively follow the price for the asset and provides liquidity in a very narrow range. There may be multiple rebalances for such strategies, often daily.

Pegged strategy is suitable for investors who hold low risk coins like stablecoins or staking tokens and would like optimal yield generation with low risk.

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