AQTIS Documentation
  • Introduction to AQTIS
  • QSD
    • What is QSD?
    • How does the yield work?
    • How do I buy QSD?
    • How do I generate yield?
    • How do I claim my rewards?
    • A deeper dive into how the yield works
    • QSD pricing dynamics
    • Permissionless Exit
    • How do I sell my QSD?
    • Quant Technology’s role in QSD
    • Compliance
    • In summary
  • QRT
    • Securing the quant tech
    • How do I claim my rewards?
    • Claiming Mechanics
    • Quant Tech Liquidity Management
    • Difference with Other LSTs
    • Compliance
    • In Summary
  • Quant Tech & AI Explained
    • Why we use quantitative techniques
    • The Investment Strategy Portfolio
    • The AQTIS Investment Thesis
    • Why we use Machine Learning/AI in our portfolio
    • How we manage risk
    • Quant Tech Workflow
    • Quant Tech Strategies - the AQTIS secret weapon
    • Conclusion
  • Quant Performance
  • Tokenomics
  • Ecosystem Liquidity Insurance Fund (ELIF)
  • Ecosystem Liquidity Aggregator
  • Calculations
    • Testing Performance
    • Total Value Locked
    • Liquidity Utilization
    • Position Sizing
    • The impact of slippage on performance
    • In summary
  • What is the AQTIS Buyback Process?
  • AQTIS FAQ
    • AQTIS Protocol TL:DR
    • What are Liquid Staking Tokens (LSTs)?
    • What is Quant Trading?
    • What are Composable Yields?
    • What is the Token Buyback Process and how does it contribute to Token Value?
    • Can AQTIS Freeze My Assets? What about Permissionless Exits?
    • What is the Maximum Supply of the AQTIS Utility Token?
    • What is the Maximum Transaction Amount for the AQTIS Utility Token?
    • Where Can I Buy AQTIS LSTs and the AQTIS Token?
    • What Blockchain Network Does AQTIS Utilize?
    • Is AQTIS Regulation Compliant?
    • How Does AQTIS Generate Revenue?
    • How Are Liquidity Rewards Distributed in AQTIS?
    • What’s the Minimum Staking Period?
    • Where Can I Find the AQTIS Utility Token Contract Address?
    • Why has AQTIS capped the TVL?
    • Why implement LSTs? Why not simply use a reward pool where people can withraw their "dividends"?
    • Why is there a standardized yield?
    • Why is the team not doxxed?
    • Why is AQTIS sharing its strategies with the community?
  • Disclaimer
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  1. Calculations

Liquidity Utilization

In an ideal world, a project would aim to use all of its liquidity to increase returns. However, this isn’t possible as it would mean there is no spare liquidity available for anything else. So there needs to be consideration of what proportion is allocated to liquidity and what proportion can be used to improve performance.

There is also another consideration: how much of your capital can be used, and how much of it remains idle. Let’s take a look at an example:

Let's assume that the markets, in combination with our strategies, can handle around 100 million in total position sizing, and on average, there is a daily liquidity demand of approximately 25%.

In this example, we would allocate 25 million as liquidity on demand on a daily basis, with the remaining 75 million being efficiently utilized within our position size threshold. This threshold is essential to minimize slippage during position exits.

If we increased our TVL to 200 million, we would still need to maintain 25% of assets as liquidity on demand (50 million), leaving us with 150 million in assets. However, only 100 million would be efficiently utilized on a daily basis, as the market is constrained at $100 million*. (this is an assumption for the purposes of explaining our thinking)

This would mean that a 100 million TVL would have approximately 75% utilization, while a 200 million TVL would have around 50% utilization. If the total TVL were to reach 1 billion, it would result in 250 million as liquidity with only 10% of assets being effectively utilized, rendering the majority of assets idle and inefficient.

We prefer maximum utilization where possible while remaining nimble enough to utilize smaller time-frames when it comes to investing.

In summary, there is a sweet spot to utilization. If our TVL becomes too big, it causes

  • Lower performance due to slippage.

  • Lower amount of strategies due to time exposure.

  • Lower utilization as we'd still need more liquidity on demand as time exposure increases.

In the next section, we dive more deeply into this idea.

Last updated 1 year ago