Overview
This guide covers advanced market making strategies on Centuari’s fixed-rate order book.
Strategy 1: Symmetric Spread
Post equal-sized orders on both sides:
Capital: $200,000
Orders:
├── Lend $100,000 @ 8.5% for 90 days
└── Borrow $100,000 @ 7.5% for 90 days
Spread: 100bps
Max profit (full utilization): $1,000/quarter = 2% on capital
Strategy 2: Skewed Spread
Adjust order sizes based on market view:
Bullish on rates (expect rates to rise):
├── Lend $150,000 @ 8.5% (larger, expect fills)
└── Borrow $50,000 @ 7.0% (smaller, harder to fill)
Bearish on rates (expect rates to fall):
├── Lend $50,000 @ 9.0% (smaller, harder to fill)
└── Borrow $150,000 @ 7.5% (larger, expect fills)
Strategy 3: Multi-Maturity
Spread across different maturities:
30-day market:
├── Lend @ 7.5%
└── Borrow @ 6.5%
Spread: 100bps
90-day market:
├── Lend @ 8.5%
└── Borrow @ 7.5%
Spread: 100bps
180-day market:
├── Lend @ 9.0%
└── Borrow @ 8.0%
Spread: 100bps
Strategy 4: Dynamic Spread
Adjust spread based on market conditions:
Normal volatility:
Spread: 50-75bps
High volatility:
Spread: 100-150bps (compensate for risk)
Low volatility:
Spread: 25-50bps (compete for flow)
- Monitor market rate movements
- Widen spreads during uncertainty
- Tighten when confident
Order Management
Position Monitoring
Track at all times:
- Open orders (both sides)
- Matched positions
- Net exposure (lend vs borrow)
- Inventory imbalance
Rebalancing Triggers
Rebalance when:
- One side fills significantly more than other
- Market rates move >50bps from your quotes
- Inventory imbalance exceeds threshold
- Maturity approaches
Example Rebalance
Starting:
├── Lend order: $100,000 @ 8.5%
└── Borrow order: $100,000 @ 7.5%
After fills:
├── Lend filled: $80,000 (you're lending $80k)
└── Borrow filled: $30,000 (you borrowed $30k)
Imbalance: Net lending $50,000
Rebalance options:
1. Cancel remaining lend order, post more borrow
2. Adjust rates to attract borrow fills
3. Accept the imbalance as directional bet
Risk Management
Maximum Position Limits
Set limits for:
- Max net lend exposure
- Max net borrow exposure
- Max single maturity concentration
Example Limits:
├── Max net exposure: $500,000 either direction
├── Max single maturity: 40% of total
└── Max utilization: 80% of capital
Stop-Loss
Define when to exit:
Exit triggers:
├── Spread compression to <20bps
├── Market move >100bps against position
└── Liquidity drops below threshold
Economics Example
Capital deployed: $500,000
Strategy: Symmetric spread at 75bps
Average utilization: 70%
Period: 1 year
Calculation:
Utilized capital: $500,000 × 70% = $350,000
Spread captured: 0.75%
Gross profit: $350,000 × 0.75% = $2,625
Protocol fee (0.1% of interest): ~$200
Net profit: ~$2,425
ROI on total capital: 0.49%
ROI on utilized capital: 0.69%
LP returns can be thin. Success requires high utilization, tight operations, and sometimes scale advantages.
API Access
For serious LPs, use the API:
import { Centuari } from '@centuari/sdk';
const client = new Centuari({ chainId: 42161 });
// Post both sides
await Promise.all([
client.lend({
asset: 'USDC',
amount: '100000',
rate: 0.085,
maturity: '90d'
}),
client.borrow({
collateral: { asset: 'USDC', amount: '125000' },
borrowAsset: 'USDC',
amount: '100000',
rate: 0.075,
maturity: '90d'
})
]);
Monitoring Dashboard
LP-specific views:
- Two-sided order book
- Fill rates by side
- Historical spread analysis
- Inventory tracking
Competing with Other LPs
Success factors:
- Speed: Fast quote updates
- Capital efficiency: Optimal collateral usage
- Spread optimization: Right balance of fill rate vs profit
- Risk management: Surviving adverse moves
FAQs
Is LP profitable for small capital?
Challenging. With 10−50k,spreadsarethinrelativetoeffort.LPisgenerallymoreviableat100k+.
Not required, but manual LP is labor-intensive. API access enables automation.
Highly variable. 5-15% annually is possible with good execution, but losses are also possible.
