FAQ

What is Hedgehog 🦔?

Active liquidity manager for Uniswap V3 that LPing for the ETH-USDC pool and hedges its impermanent losses with Squeeth.

Does it target performance in ETH or USD?

Hedgehog targets performance in ETH by replicating a synthetic ETH portfolio that earns trading fees from LPing on Uni V3 while still keeping linear ETH exposure (moves with the same speed as ETH)

How do you replicate the ETH portfolio?

The strategy provides liquidity for the ETH-USDC pool (concave payoff) and hedges with LPing for the oSQTH-ETH pool (convex payoff), so by matching these 2 derivatives we create a portfolio with *almost* simple linear payoff.

In what range the strategy provides liquidity?

Hedgehog initially LPing in symmetric boundaries +-1020 ticks (~0.9x-1.1x) around the ETH price, which we further adjust with respect to the current and expected implied volatility.

What is Hedgehog's built-in IV arbitrage?

As the Squeeth price heavily depends on the ETH implied volatility and IV is the purest mean-reverting process (value tends to its mean), we adjust the parameters having a thesis that if IV hasn't changed much recently, like it were in May or June (crab market), then we will expect a huge vol jump, while if there is already a jump (like during the 3AC crush) we expect that after it IV will slowly revert to its mean values. (Grows fast, falls slowly).

What affects the performance of the strategy?

As we LPing for both ETH-USDC and oSQTH-ETH pool are the main source of yield is trading fees that depend on ETH trading volume. To preserve the position in long Squeeth we pay an in-kind funding rate. Also, there are potential value losses on rebalances.

Profits - trading fees + IV arbitrage

Losses - long squeeth funding rate and rebalances slippages

So your source of yield is trading fees and IV arbitrage?

Indeed and the strategy performs the best during the high-vol types of markets (high vol → high trading fees), while not so well during the calm (aka crab market), that associated with low volumes and low IV jumps amplitudes.

How often do you rebalance the strategy?

There is 2 type of rebalances - time rebalance (TR) that runs each 48h and price rebalance that we execute to cut the potential losses after a huge price change (>10%) between the regular TRs.

Though to optimize performance the TR can be called only after >=1.69% price change.

Fees. Are there any fees charged by the strategy?

At the moment there are no developers fees.

Have Hedgehog contracts been audited?

NO, HEDGEHOG IS NOT AUDITED, so be careful and use only funds you can afford to lose.

What will be the deposit cap for the strategy?

We will start with a cap of 100 ETH to deposit, which is pretty small, but:

1) The contract is not audited

2) The strategy is highly sensitive to the slippage on rebalances, the optimization which is our top priority after launch.

The deposit cap will be gradually increasing by ~50-100 ETH per week. With a much faster increase after Unicrab launch (delta-neutral strategy in development).

Wen token?

Currently, there is no token besides the Hedgehog strategy token that represents your ownership claims. Also, there are no plans to launch the Liqui project token in a short-term perspective.