Rocket Pool partners with Gamma to incentivize rETH-ETH liquidity on Uniswap v3
We are proud to announce a 4-week trial partnership with Rocket Pool to incentivize the rETH-ETH 0.05% liquidity position on Uniswap v3. See below for the details of this program:
- Pool: 0.05% rETH-ETH pool
- Network: Ethereum Mainnet
- Incentives: 400 RPL distributed over 4 weeks
- Strategy: Managed between a range of +/- 1.5% of the NAV price of rETH
- Start Date: November 9th at 12:00pm EST (17:00 UTC)
- Duration: 4 weeks
Benefits to all Gamma Liquidity Providers
- Low impermanent loss pair — rETH is highly correlated with ETH, mitigating the effects of impermanent loss
- Active management — The liquidity position will be rebalanced automatically upwards as the price of rETH rises against ETH
- Delta-neutral liquidity providing (not financial advice)— by borrowing ETH, converting a portion to rETH, one could potentially earn delta neutral yields on this LP position
Because rETH is the staked ETH derivative of ETH, it will slowly accrue in price against ETH, but it is nonetheless highly correlated with the price action of ETH. As such, this allows us to provide in a very tight range with low impermanent loss.
As the exchange rate of rETH against ETH rises due to accrued ETH staking yields, the position will be automatically rebalanced, saving our LPs time and effort in managing their liquidity positions. One can simply provide liquidity on our web app and stake their position to start earning RPL rewards.
Lastly, delta-neutral liquidity providing is a hot topic amongst liquidity providers today. One delta-neutral LP strategy on Gamma could look like the following; however, this is not financial advice and should be used merely for illustrative & educational purposes:
- Supply USDT (or other stablecoin) on Euler Finance — It is currently earning 2.64% supply APR
- Borrow WETH against USDT
- Convert a portion of the WETH to rETH to provide liquidity in the correct ratio on Gamma (likely not 50/50)
- Provide liquidity on Gamma, and stake the LP tokens for RPL rewards
This strategy may bedelta neutral because the borrowed portion will suffer very little impermanent loss, while accruing staking yields from the rETH in position, LP fees, and RPL rewards. Additionally, the supply APR on USDT may be similar to the borrowing costs of WETH due to the additional EUL rewards for borrowing.
Goals of this partnership
- Deepen the liquidity source for rETH on Uniswap v3 —improves likelihood of a Chainlink oracle for rETH.
- Strengthen the peg of rETH to its net asset value
In order to build an oracle, Chainlink requires at least $2 million of daily volume to be traded across 3 exchanges (DEXs or CEXs). Having a Chainlink oracle will allow rETH to be collateralized on major lending platforms like MakerDAO and QiDao; therefore, it is prudent that an oracle be obtained.
A highly concentrated rETH-ETH position on Uniswap lowers price impact on rETH-trades on Uniswap and gives it access to the deepest liquidity on the market. A very deep liquidity source for rETH-ETH will open the door to liquidity & volumes from all other ETH-paired liquidity pools. For example, trades being routed from USDC to rETH will be able to hop with very low price impact from USDC → ETH → rETH given the abundance of liquidity in each route. As such, a deep & concentrated rETH-ETH liquidity pool on Uniswap will likely increase rETH trade volumes.
Next, the concentration of incentivized liquidity in a range of +/- 1.5% of the net asset value of rETH will strengthen its peg. One of the major benefits of Uniswap v3 is that the liquidity provider can choose the exact ranges to provide liquidity. Given the abundance of liquidity sources from other DEXs that will provide liquidity when rETH deviates materially from its Net Asset Value, it would behoove Rocket Pool to utilize the benefits of Uniswap v3 to strengthen the peg to Net Asset Value.
What is Rocket Pool?
Rocket Pool is an Ethereum liquid staking provider. The protocol seeks to lower both the capital and hardware requirements for staking on the ETH proof-of-stake network, adding to the decentralization and security of Ethereum.
When users stake towards node operators, they receive rETH, a liquid ERC-20 token which represents 1 staked ETH that is yield-bearing. The value of rETH should rise over time against ETH as more staking yields accrue for the protocol.
Get in Touch:
If you’re a project or individual looking to use Gamma to manage liquidity, please contact us through https://www.gamma.xyz/contact.
About Gamma:
Gamma is a protocol designed for the non-custodial, automated, active management of concentrated liquidity pools. This protocol is available to both public and enterprise entities like DAOs, treasuries, and protocols.
