📈Market Shifting

Shield Your Liquidity Positions From Predictable Market Swings By Carbon's Market-Shifting Intents

Arbitrageurs capitalize on expected prices and predictable volatility shifts, draining value from liquidity providers. This not only harms overall liquidity but also causes MEV leaks and reduces swapper activity due to less liquidity.

Carbon's market-shifting intents are built to shield your liquidity positions from the effects of price volatility. It provides users with intents to shape their liquidity based on the macro market trends:

Market Shifting has been extremely popular with the users of A51 v3, and they have been retained with Carbon with more customizability. These intents will be available in Market Mode:

1. Dynamic: Liquidity follows the TWAP wherever it goes. The liquidity is active most of the time.

2. Bull: Liquidity moves only in one direction as the TWAP of one asset increases against the other. The liquidity is less active compared to Dynamic.

3. Bear: Opposite of Bull. Liquidity moves only in one direction as the TWAP of one asset decreases against the other. The liquidity is less active compared to Dynamic.

4. Static: Liquidity is not adjusted at all.

5. JIT: Usually used with extremely narrow ranges, usually a single tick and the inactive capital can be used in external protocols to earn yield while the liquidity is out of range.

TWAP Duration The time window for querying the Time-Weighted Average Price (TWAP). Longer durations mean less frequent shifting.

Example

At the time of $wstETH rebasing, arbitrageurs capitalize on predictable volatility by buying underpriced $wstETH from the pool and unwrapping it on Lido at a higher price.

This repeated pattern of arbitrage leads to a predictable price jump and demonstrates the need for dynamic fees to protect against divergence loss.

Additionally, LPs must frequently rebalance their positions in yield-bearing tokens, as accrued yield shifts prices over time, leaving unbalanced positions at a disadvantage and demonstrating the need for market-shifting intents.

In this case, market shifting intents and fee intents are saviors. By setting Bull mode (indicating speculation of price increase) and dynamic fees LPs can be saved from losing value and will be able to capture the predicted market swings.