2.2.8 AMM+

Overview

Earn yield in a few clicks on coinflex.com/amm

 

What are AMMs (Automated Market Makers)?

Only large financial institutions and highly capitalized groups such as banks and trading firms can be market makers in traditional finance. Typically this requires a team of sophisticated traders and proprietary algorithmic trading bots.  

Uniswap and other DeFi exchanges pioneered the concept of retail AMMing, which was a great leap forward for crypto. Everyday people can leverage automated technologies to provide liquidity to specific trading pairs and earn trading fees (yield). 

On DEXes (decentralized exchanges), retail customers can deploy their assets to a liquidity pool, which provides the liquidity needed for trades to occur. Traders trade against and swap assets through the pool. There remains room for growth from the first AMM iteration, which on Uniswap is dealing with unleveraged spot markets. 

CoinFLEX, learning valuable lessons from the DeFi space, created a hybrid AMM model focused on futures, with greater capital efficiencies and more powerful matching engines/servers – integrated with our CoinFLEX orderbooks. Instead of being part of a DeFi pool, all the CoinFLEX AMMs have their Profit & Loss.

For every trade there is a maker and a taker. The maker is putting an order that sits on an orderbook (ie. a limit order). In the case of CoinFLEX, our AMMs receive 3 basis points maker rebates (VIP level 6 for making) by default.

Automated Market Making enables passive capital (i.e. assets that are not actively deployed into trading and investing) to enter the space of buying and selling assets effortlessly. The yield derives from the combination of maker rebates and scalping mechanisms from the AMM systems.

 

CoinFLEX AMM+ advantages over Uniswap

The Uniswap v3 model is seen as an industry “standard.” Let’s see how it compares to CoinFLEX’s AMM+. 

 

AMM+ is more capital efficient

Unlike other AMMs, CoinFLEX’s AMM+ provides the option of leverage up to 10x, and therefore greater capital efficiency. 

Because the futures markets are far larger than the spot markets, AMM+ users benefit from higher trading volume than DEX volumes. For reference, the total value locked (TVL) in Uniswap v3 is roughly $8B but trades approximately $1-2B in daily volumes (which is a fraction of the capital deployed). 

Comparatively, the CoinFLEX AMM+ has roughly $100M TVL and has more recently traded between $300M to $1.5B in daily volumes (which is multiples of the capital deployed). The availability of leverage is capital efficiency. 

Higher liquidity encourages volume growth and offers better pricing by reducing the spread and price slippage. 

 

Fees

  • AMM+ users earn a 0.03% FLEX rebate from each trade
  • Lower taker fees than DEXes (0.04% vs 0.30%) result in more chances to trade against the AMM

 

Multiple collateral types

Users can choose any single asset as collateral when opening a leveraged AMM+ position.

This means, if users have assets earning little to no yield elsewhere, they can put the funds to work in the AMM+ as collateral. For example, if users want to market make in the ETH/USD pair, they can use other assets like BTC or DOGE as collateral.

 

How does AMM+ benefit you?

AMM+ was created to democratize market making, enabling a vastly wider user base with any amount of capital ($200 minimum only) to earn from the range-bound activity of the markets and the takers on the exchange.

With the power of this CoinFLEX hybrid model, AMM+ users capture yields by leveraging CoinFLEX’s automated technologies.

You set the parameters: pick your trading pair, your collateral, leveraged or unleveraged, directional bias, and range – and the AMMs go to work for you. You can be as passive or as aggressive as you choose to be. 

AMM+ will result in a tighter spread and greater liquidity in all of our trading markets. This greatly benefits everyone trading on CoinFLEX. The AMM+ users are happy because they’re capturing yield. The takers/traders on CoinFLEX are happy because of constant liquidity. And we’re happy as an exchange creating the best trading environment for all.

 

How does AMM+ work?

AMM+ users can deploy their capital within a set price range for any given market. There are generally two schools of thought in approaching how wide or narrow a chosen price range is. 

For tight and narrow ranges, the AMM+ orders are clustered more tightly. If the price stays “in-range” due to the price concentration, you may capture more yield (APR) than usual. However, you run the risk of the price going outside this selected range, putting you in a state of impermanent loss until prices revert in your favor.

AMM+ orders are spread further out for wider ranges, which may be considered more passive (i.e. less risk of impermanent loss). The wider the range is, the more likely you’ll be “in-range.”

Another important thing to consider when deciding how passive or aggressive you want to be is whether to use leverage. With an unleveraged position, you don’t risk liquidation, though you can still experience impermanent loss. However, with leverage, you have liquidation risk (i.e., losing the collateral you set forth) if prices move against your chosen setting. 

Remember, choosing whether to use leverage depends on each person’s risk tolerance. Greater leverage can generate more yield / APR, but you will have to manage the risks.

 

Direction

The direction refers to where you think the price of the chosen trading pair will move.

 

Choose ‘Buy’

You are generally bullish on the pair you’ve chosen for your AMM+. You are only in a long position, never short if choosing ‘Buy only’. You don’t mind accumulating a long position if the market prices go against you. You assume prices will rebound in your favor.

 

Choose ‘Sell’

You are generally bearish on the pair you’ve chosen for your AMM+. You are only in a short position, never long if choosing ‘Sell only’. You don’t mind accumulating a short position if the market prices go against you. You assume prices will go downwards in your favor.

 

Choose ‘Neutral’

If you think the price of an asset will fluctuate in a range-bound manner, centered around the midpoint you choose.

Please refer below for a more detailed description on how to choose your price direction.


Tutorials

 

Setting up an AMM+ Position:

 

Step 1. Enter the AMM+ page

To begin using AMM+, click the AMM+ tab on the dashboard of the main home page. 

Screenshot 2021 10 19 at 5.59.47 PM 2.2.8 AMM+

 

Step 2. Setting up your AMM+ 

Select unleveraged or leveraged.

If you are creating an unleveraged position, you can skip directly to step 3.

If you are creating a leveraged position, select the amount of leverage between 1x to 10x and pick a collateral to use from your available balances. For example, if you are choosing the BTC/USD trading pair, you can use any other collateral such as BCH or ETH. 

Be aware that a leveraged position will put you at risk of liquidation if the prices move opposite to your chosen direction. 

Screenshot 2021 10 19 at 6.12.22 PM 2.2.8 AMM+

 

 

Step 3. Select the direction: Buy, Sell, Neutral

When selecting the direction, it’s important to remember the ultimate goal is to stay in range because this is when you are earning trading fees and your AMMs are scalping (working for you). By selecting the direction, you are making a decision on where you think the market price is heading – and based on that what your AMM+ will do in best/worst case scenarios.

 

Buy

Best case scenario to exit without a loss:

  • Be in-range 
  • Earn some yield 
  • Ultimately exit when prices are near/above your range so you won’t exit at a loss or further positional exposure. 

 

Less favorable scenario occurs: 

  • Prices get closer or through the bottom of your range, 
  • You accumulate a long position, which you are not opposed to, as your view is generally bullish and you’re willing to patiently wait for a rebound.

 

Worst case scenario:

  • Price falls below the min of your range and never returns, leaving you at a loss.

Sell

Best case scenario to exit without a loss

  • Be in-range 
  • Earn some yield
  • Ultimately exit when prices are below your range

 

Less favorable scenario occurs: 

  • Prices get closer or through the top of your range
  • You accumulate short positions, which you are not opposed to, as your view is generally bearish and you’re willing to patiently wait for prices to fall.

 

Worst case scenario:

Price rises above the max of your range and never returns, leaving you at a loss.

 

Neutral

Best case scenario to minimise losses as much as possible: 

  • Be in-range 
  • Earn some yield 
  • Exit Neutral positions as close to your midpoint as possible. 

 

Worst case scenario:

Price never returns to your midpoint.

 

Screenshot 2021 10 19 at 6.26.22 PM 2.2.8 AMM+

 

Step 4. Select the trading pair 

Select which asset you want for your AMM+ position. CoinFLEX has a wide range of options to choose from!

 

Screenshot 2021 10 19 at 6.43.16 PM 2.2.8 AMM+

AMM+ users can view the transparency page to see which coins have the highest 24 hour average or 7 day average APR for reference before creating an AMM. The rates are subject to change and are an average across all users. Depending on your range and leverage you may get a different APR than the 24 hour or 7 day average APR.

To find more information on AMM+’s current statistics, you can visit the transparency page.

 

Step 5. Input amount

Enter the amount of capital you’d like to allocate to your AMM+ position. You will need to input a minimum of $200 USD worth of crypto assets as collateral.

For unleveraged neutral positions you will need to have a minimum of $200 USD worth of crypto for both assets in the trading pair as collateral.

Screenshot 2021 10 19 at 8.12.00 PM 2.2.8 AMM+

 

Step 6. Choose the price range

This is where you select the range where your liquidity will be concentrated. The tightness of the range will determine the size of your returns. 

A broad range will consistently earn fees but will be less concentrated. This has lower risk, but you are more likely to stay within the range and earn trading fees.

A narrow range will result in higher fees when the asset is trading within that price range, but you risk not making any fees if the price goes outside of your range. 

Please remember, if you are leveraged and the price of your assets moves outside your range, there will be a risk of liquidation.

Screenshot 2021 10 19 at 8.13.24 PM 2.2.8 AMM+

 

Step 7. Begin using AMM+

Before proceeding, confirm all the information you have selected on the AMM+ page is correct. After confirming this, click “Begin AMM+” to start earning yield on AMM+!

Screenshot 2021 10 19 at 8.14.52 PM 2.2.8 AMM+


 

Managing Your Position 

Once you have set up an AMM+ position, you can manage your open position by switching to the AMM Positions tab. To manage your open positions, use the following steps:

 

Step 1: Review the details of your position

The “open” tab is the default tab, which you can use to manage and review your open positions.

Each AMM+ position will have its own information card, including information such as the title of the AMM+ position, the date of entry, leverage, trading pair, and more.

You can click the balance breakdown button below your APR to review information such as total account balance, initial balance, current balance, and more. 

You can click the more details button to view all the information on the trade history of your specific AMM+ position, your borrow and liquidation history, interest payment history, and more.

If you want to add or withdraw collateral, proceed to step two.

Screenshot 2021 10 19 at 8.25.45 PM 2.2.8 AMM+

 

Step 2: Add or withdraw collateral 

To add collateral or withdraw collateral, click the add collateral button to the left of the redemption button. This will open a pop up box, which will allow you to proceed.

Screenshot 2021 10 19 at 8.30.22 PM 2.2.8 AMM+

 

Step 3: Input information

Select whether you want to add or withdraw crypto, the crypto asset you want to select, and the amount from your available balance.

 

Step 4: Click confirm

 

Redeeming Your Position

Once you have set up your AMM+ position, by clicking “Begin AMM+” at the bottom of the “set up AMM+” tab in the AMM+ page, you can redeem your open positions by switching to the AMM+ Positions tab. If you want to learn how to redeem your open positions, use the following steps:

 

Step 1: Identify your AMM+ position

The “open” tab is the default tab, which you can use to redeem your open positions. You can identify your different AMM+ positions with the ID in the top right corner.

 

Screenshot 2021 10 19 at 8.37.08 PM 2.2.8 AMM+

 

Step 2: Click the redemption button

At the bottom of the box of the specific AMM+ position you want to close, click the redemption button.

 

Step 3: Choose your redemption method 

To receive the base currency of your trading pair, for example to receive BCH in the BCH/USD trading pair, choose “physical delivery” in the redemption method drop down menu.

The information will show the current Balance and a link to the “add collateral” pop up box to show your estimated redemption balance.

To deliver your position to a sub account, click “sub-account delivery” in the redemption method drop down menu. 

The information will show the current balance, position, and borrow USD Position.

Screenshot 2021 10 19 at 8.47.32 PM 2.2.8 AMM+

 

Step 4: Redeem

Once you have chosen your redemption method, click redeem. 

 

Step 5: Review your closed position

Click the ‘closed’ tab on the AMM+ positions page and review the information.

Screenshot 2021 10 19 at 8.57.14 PM 2.2.8 AMM+

 

Step 6 step: Check your wallet

Ensure your crypto assets have been delivered to your wallet. If you have delivered to a sub account, click the sub-account button under the account dropdown menu next to “Wallet & Order.”

You may have existing open positions on the exchange, so make sure you go to the exchange to close any open positions. 

If you have chosen “physical delivery”, click the “balance” button in the “Wallet & Order” dropdown menu and check that your crypto assets have been credited. 

 


I’d like to read more about AMM+

How to Crush AMM+: Where to Set Price Ranges

A Brief Introduction to AMM+ and the Importance of Liquidity

How CoinFLEX’s AMM+ Solves All the Issues of Other AMMs

Trading Options Using LP Tokens on CoinFLEX’s AMM+ Product

I need more help

For enquiries, please contact our customer service via live chat or ask in CoinFLEX official Telegram group: https://t.me/coinflex_EN

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