Optimal LP Width in Bull/Bear Markets
We simulated LP performance on the ETH-USDC 0.3% pool. Here's what did best.
We analyzed simulated LP performance on ETH-USDC 0.3% pool.
Results were surprising: 📢 The optimal width was wider than expected.
What's the optimal width for max returns?
How does that change for 🐂 vs 🐻 markets?
Find out 👇
The strategy is simple:
💦 LP around the current ETH price with ±X% width
⚖️ Rebalance your LP position after a day, week, or month (you pick)
💵 Collect & compound your fees!
Our analysis includes >1.5 years of data (Jun 2021 - Jan 2023)
On 5 different range factors:
±5% (r = 1.05)
±20% (r = 1.2)
±50% (r = 1.5)
±75% (r = 1.75)
∞ (UniV2 full-range, r = 1000)
Which one did best?🤔


For the FULL period (Jun 2021 - Jan 2023):
Daily rebalancing: r* = ∞ (full range)
Weekly rebalancing: r* = 1.5
Monthly rebalancing: r* = ∞ (full range)
LPs end up w/negative returns for this pool, but were raking in $ during the bull market (~40% returns in < 6 months)
For the 🐂 market (Jun 2021 - Mar 2022):
Daily rebalancing: r* = 1.5 - ∞
Weekly rebalancing: r* = 1.5
Monthly rebalancing: r* = 1.75
LPs end up positive! (~20% returns in 10 months)
For the 🐻 market (Apr 2022 - Jan 2023):
Daily rebalancing: r* = ∞
Weekly rebalancing: r* = 1.75 - ∞
Monthly rebalancing: r* = ∞
LPs end up negative (-24% returns in 10 months, but compare that to -55% returns on ETH!)
During 🐂 market, optimal range was tighter (r = 1.5 - 1.75). But during 🐻 market, optimal range was wider (r = 1.75 - ∞). Here's why 👇
Tight range:
🤑 "Greedy"
🚀 More fees! (~6,000% cumulative fees in 1.5 years, r = 1.05)
💩 Buy losing asset faster, sell winning asset faster
Wide range:
🦺 "Safe"
🚀 Buy losing asset slower, sell winning asset slower
💩 Less fees (16% cumulative fees, r = ∞)
There's a tradeoff in choosing r:
⬆️ fees ⬇️ payoffs
or
⬇️ fees ⬆️ payoffs
@guil_lambert has a good "Guide For Choosing Optimal Uniswap V3 LP Positions" 👇
✅ Gives probability of landing ITM
❌ Doesn't account for where we land ITM
❌ Doesn't account for time spent ITM
Caveats:
⛽ Ignores gas & rebalancing fees
📈 Assumes fees/returns compound day-over-day
⚠️ Past performance is no guarantee of future results!
Questions:
🌊 What about other pools? (🦄, ₿, SHIB, ...)
⚖️ What about stablecoin pools?


Disclaimer:
📢 None of this should be taken as financial advice.
⚠️ Past performance is no guarantee of future results!