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Set equilibrium price

When configuring a new pool in EulerSwap using Maglev, setting the equilibrium price is a critical parameter that fundamentally shapes the behavior of your liquidity pool. This parameter defines the theoretical balance point of your AMM curve and has significant implications for capital efficiency and risk management.

What is the Equilibrium Price?​

The equilibrium price (displayed as a green bar in the MagLev interface) represents the marginal price where the AMM curve is centered—the theoretical balance point at which the virtual reserves of both assets in your pool are perfectly aligned. This price:

  • Determines the slope of the AMM curve at its midpoint
  • Establishes the price at which your account is neither directionally long nor short
  • Represents the point at which your position is closest to being delta-neutral
  • Is explicitly defined by the priceX and priceY parameters when setting up the pool

Strategic Considerations​

When setting the equilibrium price, consider these key factors:

  • Market Alignment: The equilibrium price should ideally match the current market price of the asset pair to minimize arbitrage losses.
  • Arbitrage Risk: If the equilibrium price deviates significantly from the market price, arbitrageurs will quickly exploit this discrepancy, potentially causing immediate losses to your position.
  • NAV Midpoint: The equilibrium price corresponds to the NAV (Net Asset Value) midpoint of your position—the price at which your account maintains optimal balance between assets and liabilities.
  • Directional Exposure: When the current market price diverges from your equilibrium price, your position becomes directionally exposed.
  • Borrowing Triggers: Price divergence from equilibrium triggers borrowing in the Just-in-Time (JIT) model, as EulerSwap dynamically borrows output tokens against input token collateral to fulfill swap requests.

Operational Management​

After deployment, you'll need to:

  • Monitor the gap between current price (blue bar) and equilibrium price (green bar)
  • Consider rebalancing your position when significant divergence occurs to maintain neutrality
  • Manage risk exposure and avoid liquidation, especially when operating leveraged positions
  • Understand that redeployment is necessary if market conditions shift dramatically