With the recent volatility in the market, your current pools may be out of range, so you're now left with all your pool's liquidity in one coin (likely not USD) and not earning any yield from transactions.
At this point, there are several things you can do with your out-of-range pool; we can't say which is the best option for you in terms of earnings since everyone has a different PowerPool and a different take on the market, but here are three available options.
What to do when your PowerPools are out of range:
- Edit the PowerPools price range - if the pool is slightly out of range
- Delete and recreate new PowerPools - if the pool is way out of range
- Do nothing - wait it out until the pool comes back into range
How to prepare your PowerPool for success:
- Set up Drift (Auto-Rebalance) for your PowerPool
- Buy Pool Protection
Edit the PowerPools range:
For simplicity of explanation, we'll assume that you have an ETH-USD pool that is out of range on the lower side. As you read through the article, you can substitute ETH with your currency or reverse the example if it is out of range on the upper side.
Quickly editing the range is a viable option for PowerPools that are slightly out of range. Adjusting the range edit will bring the pool back into a useable range so you can resume collecting fees.
If your pool has gone out of range, all your pool's liquidity has been converted into ETH. For example, suppose you adjust your pool range down from $1,100 USD to $900 USD. Then the pool will cancel all current orders within the pool and recreate new orders starting from $900 USD up to the top range of your pool.
Since you are updating the pool's range without adding liquidity, a portion of your ETH will be sold into USDC at the current spot price to place orders from US$900 up to the spot price of ETH. This also means that your ETH will likely be sold below what you originally paid for them. Because of this, it would be better to edit the range only if you make a slight adjustment.
Delete and recreate a new PowerPool
If your PowerPool is way out of range, then the easiest (also likely the least pricey) way to put your pool back into range is to delete and recreate a new pool. Since there are no fees incurred when you cancel a pool and no lockup period, you won't incur any cost for deleting a pool.
When you delete your current pool, you will get all your assets, including any yield, back into your account. Then you can recreate a new pool with a new range that is closer to the current spot price.
This option will also be easier to manage as you can start from a clean slate and add just the amount of liquidity needed to create a new balanced pool – without selling away any of your ETH to buy the other coin. The only con is that you'll lose information about how much your yield was in the original pool.
In many cases, you can also decide to do nothing and leave the pool as is until the market goes back into range. Doing nothing can be a wise move in many cases, as you'll not be buying and selling ETH at a low price or incurring transaction fees from these losing trades.
How can I prevent my PowerPool from going out of range or after my pool is back in range? How do I set up my Pool for success?
After you put your pool back in range, now is the time to prep your pool for future success. You can do this by setting some automation rules for your pool. This allows you to allocate an amount of your earned yield into performing different actions with your pool.
Set a "Drift" rule for your pool
The Drift rule sets aside your allocated amount of yield (shown as "Drift Allocation") regularly and puts it in a separate bucket.
You then set the range (shown as the blue line in the image) when you want the pool to start drifting. When the spot price (red triangle) moves into the "Drift range," the yield that has been set aside will be used to move your pool's range downwards or upwards and rebalance your pool by the same percentage. This means that your pool's range will move in tandem with the spot price, so your pool will never go out of range as long as you have enough to rebalance your pool. And you can keep earning yield from continuous trading.
COMING SOON! - Buy Automated Pool Protection
In times of volatility, another rule you might want to consider is buy "Pool Protection," which protects your pool against impermanent loss.
What the rule does is allocate yield towards buying options regularly on the upper or lower end of your pool's range, so in case the spot price moves too far down, or up the range, you'll still be able to make back the impermanent loss in value from options profits.
You can choose to buy Call options or Put options or both Call and Put options, depending on your view of the market. And you can also decide how far out you want the Protection to be and whether you want to hedge the full amount of your pool or just a percentage.
Disclaimer: This is not financial advice. The features described in this article and the information provided does not constitute investment advice.
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