Strategy Details

Empower AI Protocol supports 3 types of strategies:

  1. Active Strategies

  2. Passive Strategies

  3. Pegged Strategies

Active Strategies

Empower AI Protocol brings its proprietary quantitative strategies on-chain, creating positions within narrow liquidity ranges. These constantly monitor price movements and strategically triggering rebalances that reduce Impermanent Loss while maximizing generated fees.

Some key features include:

  1. Narrow price ranges maximize the trading fee earned

  2. Impermanent loss is mitigated by automatically rebalancing the portfolio in real-time to when token positions depart from their optimal range

  3. Passive windows during high volatility periods to reduce Impermanent loss and toxic flow

  4. Rebalances for high slippage pools are optimized with Just-in-Time Liquidity resulting in swaps with 0 slippage

Active strategies are suitable for investors with higher risk appetites (in terms of Impermanent Loss) and generally expect higher returns.

Passive Strategies

Passive strategies provide assets in wide ranges around the current price, where the position is expected to stay within range for a long time. The vault strategist may choose to periodically rebalance depending on market conditions.

Passive strategies are suitable for investors with low-risk profiles.

Pegged Strategies

Pegged strategies are used for assets with strong price correlations, specifically:

  1. Hard-pegged like USDT-USDC where assets are supposed to be redeemable 1:1 and have minor fluctuations based on market factors

  2. Soft-pegged like wstETH-ETH where assets are correlated based on external factors. In this case, wstETH’s follows but may vary slightly based on the market.

For hard-pegged pairs, the pegged strategy tries to provide liquidity in a narrow range. If the price goes out of range, the strategy expects the price to mean-revert and does not rebalance. If the price stays out of range for too long, the strategist can choose to move the range around the current price based on market conditions.

For soft-pegged pairs like wstETH-ETH, the strategy tries to actively follow the price for the asset and provides liquidity in a very narrow range. There may be multiple rebalances for such strategies, often daily.

Pegged strategies are suitable for investors who hold low-risk coins like stablecoins or staking tokens and would like optimal yield generation with low risk.

Last updated