🍸How to reduce IL

High Frequency LP gives turbo fee-generation, but there is always Impermanent Loss (IL), and there is no avoiding it in liquidity providing. The goal is to OUTPRINT IL, while mitigating IL. Here’s how:

1. Wider LP ranges

   • High Frequency Liquidity prints hard from tight real-time rebalancing LPs. You can mitigate IL by setting slightly wider ranges. Tradeoff is less concentrated (but possibly more sustainable) fee generation.

   • 💡Alpha: Set LP widths based on expected volatility of token

   • 💡Alpha: Slow weekends with muted price action are great for HFL

2. Slower auto-rebalances

   • 0 minute real-time rebalances maximize in-range fee generation, especially for high vol pools. But sometimes you can set 5-15 minute rebalances instead to avoid adverse IL from extreme pumps/dumps

     Tradeoff is less in-range (but possibly more sustainable) fee generation

   
3. Directional auto-rebalances

   • Set HawkFi to rebalance when token price goes up-only, instead of up & down. Rebalances amplify positive IL upwards, and negative IL downwards.

   • Tradeoff is significantly less fee generation, but up-only rebalances are suitable for steady long-term fee generation of high-conviction tokens

   
4. Very strict Entries & Exits

   • Only enter LPs when A) Token price trades sideways/upwards, and B) Volume is high

   • Avoid & immediately exit when A) Token price dumps, or B) Volume dries up