A51 Finance — 4 Things You Should Know About Rebalancing

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Rebalancing means adjusting the liquidity position range.

Rebalancing in A51:

A51 offers preference-based rebalancing. When you create a strategy on the A51 app, you have to decide on certain factors to determine how rebalancing will work for your strategy. These factors are customizable and include:

  1. Selecting a market mode
  2. Setting a rebalance frequency
  3. Setting a minimum and maximum price range
  4. Determining a price deviation threshold

Before understanding each one by one, let’s first see how A51 rebalancing is different from rebalancing in ALMs.

1️⃣ Selecting a Market Mode:

Market mode is a feature that lets you select which kind of market trend you want your liquidity position to adjust for. There are 4 market modes to choose from:

Bull Mode
Your liquidity position trails the current asset price as it increases and goes out of range. It is suitable for bullish market trends so you would be able to capture more of the upside.

Bear Mode
Your liquidity position trails the current asset price as it decreases and goes out of range. It is suitable for bearish market trends so you can protect yourself against decreasing prices.

Dynamic Mode
Your liquidity position trails the current asset price as it increases or decreases and goes out of range. It is suitable for markets with little or no clear trend, that is, highly volatile so you can capture maximum fees.

Static Mode
Your liquidity position remains fixed and does not trail the changing asset prices. This mode is best used with other parameters like liquidity distribution.

Select mode from the given basic modes

2️⃣ Setting a Rebalance Frequency:

Determine how many times you want the protocol to rebalance your liquidity position before it pauses rebalancing.

  • This helps you make a deterministic decision by rethinking your strategy after the set number of rebalances as the market may change in nature.
  • It also helps prevent changes in your liquidity position too many times thus protecting you from bigger losses which usually happen in active rebalancing.
Set a rebalance frequency

3️⃣ Setting a Price Range:

A51 doesn’t limit you to a fixed price range or ratio while creating a strategy.
You define the minimum and maximum price range around the current price. You can make it in a custom ratio according to your assets and investment mindset.

Set the price range (use the liquidity graph or enter the range manually)

4️⃣ Determining a Price Deviation Threshold:

The price deviation threshold is the minimum and maximum price below and above the price range you set.
In ALMs, as soon as the price goes out of range, it rebalances.

But with A51 it’s different. When you set a price deviation threshold, you guide A51 at what price rebalancing of your liquidity position should happen. Here’s how it benefits:

  • It is a high-level customization that helps you minimize unnecessary losses.
  • It also prevents spammed rebalancing during market volatility.
  • As a strategy creator, you can speculate if the market bounces back to your main range until your set threshold of resistance or support.
Set the price deviation threshold

By customizing these factors, you are guiding A51 to rebalance when these conditions are met. It requires you to stay updated with the market, especially how your deposited tokens perform to make informed decisions.

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A51 Finance | Previously Unipilot

'Remote Control' for your liquidity positions offering a superior UI to use underlying AMMs.