> ## Documentation Index
> Fetch the complete documentation index at: https://docs-staging.centuari.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Market Making

> Advanced strategies for liquidity provision

## 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
```

**Pros**: Simple, balanced exposure
**Cons**: Requires significant collateral for borrow side

## 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)
```

**Pros**: Profit from directional view
**Cons**: Wrong direction = losses

## 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
```

**Pros**: Diversification, captures term structure
**Cons**: More complex to manage

## 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)
```

**Implementation**:

* 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%
```

<Warning>
  LP returns can be thin. Success requires high utilization, tight operations, and sometimes scale advantages.
</Warning>

## Tools for LPs

### API Access

For serious LPs, use the API:

```typescript theme={null}
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:

1. **Speed**: Fast quote updates
2. **Capital efficiency**: Optimal collateral usage
3. **Spread optimization**: Right balance of fill rate vs profit
4. **Risk management**: Surviving adverse moves

## FAQs

<AccordionGroup>
  <Accordion title="Is LP profitable for small capital?">
    Challenging. With $10-50k, spreads are thin relative to effort. LP is generally more viable at $100k+.
  </Accordion>

  <Accordion title="Do I need to run bots?">
    Not required, but manual LP is labor-intensive. API access enables automation.
  </Accordion>

  <Accordion title="What's realistic ROI?">
    Highly variable. 5-15% annually is possible with good execution, but losses are also possible.
  </Accordion>
</AccordionGroup>