The intention of this post is to offer a concentrated Uniswap V3 position as a solution to liquidity problems we have been having. ARCX continues to support and subsidize sushi LP (SLP) with Farm 9, but the pool has yet to reach a critical mass that has significant depth.
Right now, the +/-2% pool depth on the sushi WETH/ARCX pool (the maximum transaction size at which 2% slippage occurs) is approximately $13k USD or 5 ETH. This means any individual wishing to buy ARCX in larger allotments may be deterred by significant slippage, and at even just 15 ETH, a user receives a ‘swap anyway.’
Additionally, low liquidity leaves the ARCX token unattractive to market researchers from a fundamental perspective and very susceptible to market manipulation.
First of all—and this is completely aside from the ‘problem’ as stated above, but no less important—Uniwswap is the 69% of the DEX market by volume. We need a Uniswap pool from a market integration perspective. Many use DEX aggregators, but many users still navigate to (and do market research on) Uniswap directly.
Returning to the ‘problem’ as stated above is where Uniswap v3 comes into play. The capabilities of v3 are beyond the scope of this post (for more reading, see the official recommended doc page), but the major strength is that a concentrated positions (positions with lower and upper limits) can:
- Require much (up to x100s) less liquidity to achieve similar depth and efficiency as a full-range pool
- Be strategically placed to support buy-side pressure, rather than sell-side pressure
There are endless debates and simulations to be made regarding Uniswap v3 positions. To make a long story short, I want to propose that ARCx DAO use some amount of the treasury of ARCX tokens in a concentrated Uniswap v3 position just above the current market price and to several multiples of that current market price. By placing the position just above the current market price, it will only require a one-sided contribution of ARCX, and will support buy-side orders going up from the price on the day of deployment onwards.
I’m very willing to discuss other formulations, features, or specific ranges that others find valid, but there are at least 2 ranges on Uniswap v3 that would better serve market orders than currently capable from the sushiswap pool.
For reference, a full range v3 position (equivalent to a v2 position) is listed first here; without further ado, the options I have calculated for a ~$50,000/25 ETH swap to have 2% slippage or less (4x the current depth capability of the current sushi pool):
- [Full range], $2.5 million liquidity required
- [Market price - 6x market price], ~$830k liquidity required (3x more efficient)
- [Market price - 3x market price], ~$500k liquidity required (5x more efficient)
How these pools would work is (assuming ARCX/ETH pool):
- Sell $1.25 million ARCX for ETH to acheive 50:50 balance for full range
- Deposit only ~$833k ARCX just above market price; as ARCX price increases, it gets converted to ETH, up to the point where it acheives x6 it’s current market price (vs. ETH) and then the position would be 100% ETH
- Same as 2, but deposit is $500k ARCX and is converted to 100% ETH at x3 it’s current market price (vs. ETH)
Note: 6x the current market price (approximately $2.7 USD/ARCX) is about as high as the ARCX token has ever gone (pre-split or otherwise); 3x the current market price is about is higher than the post-split token has ever gone
The above positions 2. and 3. would also require some kind of direct oversight to update
should when the buy-side pressure goes strongly above the range in the future. My recommendation would be that when the pool regains a 50:50 weight (say at 3x current market price in option 2. for example), the pool be re-evaluated by the treasurer team or in community call or…?
ARCX/ETH pair is proposed vs USDC because (a) it’s the most popular pair, again aligned with liquidity on the most popular DEX, and (b) like the ‘just above market price range’ feature, we’re not trying to explicitly facilitate exit liquidity (which usually wants to go directly to stables).
This topic is tagged as a discussion, but I want to move it forward to a formal proposal ASAP if it is to use ARCx DAO treasury to seed this position. My preference is for option 2. above or a range like it. Please weigh in below. Thanks!