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Configure asymmetric concentration

Asymmetric concentration in EulerSwap allows liquidity providers (LPs) to tailor liquidity distribution for each asset in a trading pair independently. This feature optimizes capital efficiency while managing impermanent loss risks, particularly in volatile markets. Below is a detailed breakdown of its mechanics, strategic use cases, and operational considerations.

What is Asymmetric Concentration?​

Asymmetric concentration enables LPs to set different liquidity density levels for each asset in a pair. For example:

  • Concentration X: Controls liquidity density for the first asset (e.g., USDC).
  • Concentration Y: Controls liquidity density for the second asset (e.g., WETH).

Key characteristics:

  • Range: 0% (flat, constant-sum pool) to 100% (hyper-concentrated, Uniswap v3-like).
  • Impact: Higher values concentrate liquidity around the equilibrium price, reducing slippage but increasing impermanent loss risk. Lower values spread liquidity broadly, mitigating risk but reducing fee earnings

Mathematical Foundation​

The concentration parameter C defines the curve’s slope using:

PriceImpact∝1C.NAVPrice Impact∝ \frac{1}{C . \sqrt{NAV}}

Where:

  • C = Concentration value (0 < C ≤ 1)
  • Higher C → Flatter price impact curve near equilibrium.

Operational Best Practices​

ScenarioAction
Price > EquilibriumBroaden concentration on overvalued asset to reduce directional exposure.
Price < EquilibriumTighten concentration on undervalued asset to capture arbitrage.
High VolatilityAsymmetrically lower concentration on volatile asset (e.g., WETH).

Critical notes:

  • Rebalancing: Asymmetric concentrations require active monitoring. Use NAV and debt metrics to adjust strategies.