Summary:
Ramp Paypool (pyUSD-USDC) A factor from 150 to 1000 over 1 week
Votes:
https://dao.curve.fi/vote/ownership/695
Abstract/Motivation:
pyUSD and USDC are both fiat-backed stablecoins with relatively low volatility. Therefore, we considered whether it would be safe to ramp A above 150 to better concentrate liquidity near the peg. Simulations suggested that an A factor up to 2000 would maintain reasonable pool balance, while increasing returns and liquidity density. However, to gauge the viability of such a drastic change, we propose to first ramp A to 1000, and consider further ramping after observation.
Simulations:
Simulations for A values from 100 to 2000 are shown below. Minute-resolution price data from 2023-08-30 to 2024-04-17 were used. Therefore, the sample includes the full range of volatility regimes exhibited since pool launch.
Annualized returns and median liquidity density increased across all values, and median balance remained above .8 (60% / 40% pool balance) up to A=2000. However, some caution is warranted due to periods of extreme balance (reflected in lower “minimum balance” values with higher A). Therefore, we suggest A=1000 as a comfortable medium value at this time.
For:
Increases liquidity density, which allows for larger arbitrage trades and more competitive non-strategic “convenience trades”.
Against:
Will increase potential for pool imbalance.