Gamma Strategies

The $100m TVL Protocol Managing Liquidity On 7 Chains

Here comes liquidity management thread #4! Today, we look at @GammaStrategies

Gamma is one of the most well-integrated players in the liquidity management game, and it shows in their TVL:

First, in case you missed them, here’s thread #1 (@steakhut_fi):

https://twitter.com/ValiantRes3arch/status/1661039890929442816

#2 (@0xOrangeFinance):

https://twitter.com/ValiantRes3arch/status/1661715772752920577

And #3 (@ArrakisFinance):

https://twitter.com/ValiantRes3arch/status/1663858790096338945

Now, back to Gamma! Currently, they manage liquidity on:

✅ @Uniswap

✅ @QuickswapDEX

✅ @zyberswap

✅ @ThenaFi_

Spanning 7 different chains overall

Gamma also has 4 different types of strategies:

For volatile assets, they have pools that use the Narrow Range and Wide Range strategies

And for stable/pegged assets, they run the aptly named Stable and Pegged Asset strategies

The Narrow Range strategy aims to keep assets in a narrow price range, which benefits from more trading fees, but can also get hit with more IL if volatility picks up

This strategy is typically best when used short-term in a low-volatility environment

The Wide Range strategy is more “all-weather,” as it earns trading fees from a wider range of prices

This generally means less fees, but also less IL than Narrow Range For passive income on volatile LPs, Wide Range is probably the best bet

Meanwhile, the Stable and Pegged Asset strategies keep liquidity in extremely tight ranges as these assets typically don’t deviate much in terms of price

For example, it might provide liquidity for the USDC/USDT pair between 0.995 and 1.005 and stETH/ETH between 0.98 and 1

There’s another important difference between the strategies: dynamic vs static

The Narrow/Wide range strategies are dynamic, which means the price range moves along with the assets

The point of this is to earn trading fees even if there’s volatility in the underlying assets

However, the Stable/Pegged strategies are static, meaning the price ranges don’t move even if the underlying asset’s price moves outside the range

Using the prior example, if USDC/USDT went to 0.99, the strategy wouldn't move or earn fees until it got back up to 0.995-1.005

The reason for this is simple – once pegged assets lose their peg, it can get pretty ugly

Understandably, Gamma wants to avoid any potential effects of that process in their vaults

Now, let’s talk about the $GAMMA token!

GAMMA has a very interesting staking mechanism

Once you deposit your GAMMA for the staked version xGAMMA, all staking rewards automatically accrue to your original GAMMA

Additionally, xGAMMA is priced in terms of GAMMA

For example, say the price of xGAMMA is 1.1 GAMMA when you start staking, and 1.3 GAMMA when you withdraw

You’ll have the same amount of xGAMMA the whole time, but the amount of GAMMA you get back is 18.2% higher (1.3/1.1)

This method means you don’t need to spend gas fees every time you want to claim your rewards – instead, they’re directly built into the xGAMMA price

Stakers generally earn 10% of the fees from each pool, although that number may vary

Finally, let’s peer into the future of Gamma Strategies

It seems like the main focus of the team at this point is to expand their array of strategies

Makes sense to me – first, cover lots of ground by partnering with some of the top DEXs in the game on several chains, then bring the best strategies to your giant user market

A few strategies in development are:

✅ Leveraged Strategy

✅ Delta-Neutral Strategy

✅ Risk-On Strategy

✅ Leveraged strategy – use LP tokens as collateral, loop in a money market protocol by borrowing tokens in the LP token pair, and earn multiplied returns

✅ Delta-neutral strategy – collateralize stables, borrow ETH to hedge LP

That way, if ETH goes up, the LP profits; if ETH goes down, the borrowed amount goes down

✅ Risk-on strategy – use perps to boost yield for depositors in addition to earning trading fees for magnified returns in either direction

To read more about @GammaStrategies and the broader liquidity management ecosystem of DeFi, be sure to check out my article here: