Shapes & Strategies

Liquidity Shapes and Strategies Overview

Ferra’s DLMM offers a catalog of pre‑built liquidity shapes—ready‑made templates that define how tokens are distributed across discrete price bins. These shapes empower liquidity providers (LPs) to position their capital in a way that aligns with their strategy and risk appetite: concentrating liquidity near the spot price for high efficiency, spreading it widely for passive exposure, or setting twin peaks to automate “buy low, sell high” cycles.

In Ferra DLMM, each price bin represents a fixed price level (e.g., 2.95, 3.00, 3.05 USDC per SUI), and swaps occur with zero slippage as long as sufficient liquidity exists within the bin. Unlike traditional AMMs that distribute liquidity uniformly or CLMMs that concentrate liquidity within continuous ranges, DLMM uses discrete bins to enable precise capital allocation.

Because LPs earn fees only when swaps interact with bins holding active liquidity, choosing the right shape is crucial to maximizing fee income, reducing idle capital, and minimizing manual rebalancing.

Ferra currently supports three primary liquidity shapes: Spot, Curve and Bid-Ask. Each shape corresponds to a distinct strategy, tailored for different market conditions, from stablecoin stability to memecoin volatility and is designed to help LPs balance fee generation, capital efficiency, and risk exposure.

Spot Strategy

Spot shape follows the Fat/uniform distribution, The liquidity is spread equally across every bin within a user‑defined price window (for example, ±5 % around the current price). Each bin therefore contains the same share of the tokens, allowing the pool price to drift inside that band without pushing your position out of range.

• When to use: Stablecoin pairs, blue‑chip assets, or any market where you prefer a passive, “always‑in‑range” stance.

• Strengths: Maximum time‑in‑range, minimal upkeep, transparent impermanent‑loss profile.

• Trade‑offs: Capital is not concentrated at the mid‑price, so fee APR may lag more focused shapes (like Curve or Bid‑Ask) during high volatility.

• Considerations: The even distribution dilutes liquidity per bin, potentially reducing fee earnings in stable markets where trading concentrates around a narrow price range. LPs must select a range wide enough to capture price movements but not so wide as to compromise capital efficiency.

Curve Strategy

A Curve shape stacks the majority of the liquidity in bins closest to the current price, tapering smoothly toward the outer bins so it resembles a Gaussian bell curve. The goal is to maximize capital efficiency at the mid‑price, where most trading volume occurs, while still covering a modest price range so your position stays in‑range if the market drifts.

• When to use: Sideways or range‑bound markets where price oscillates around a mean value (e.g., BTC‑SUI, large‑cap pairs).

• Strengths: Higher fee capture and lower capital wastage compared with a flat Spot shape, because more liquidity is sitting exactly where trades happen.

• Trade‑offs: As price trends, the mid‑price can leave the peak of the curve; you’ll need to re‑center periodically or accept lower utilization.

• Considerations: If the price moves outside the concentrated range, the position becomes inactive, halting fee earnings until rebalanced. This strategy requires active monitoring in volatile markets to maintain effectiveness.

Bid‑Ask Strategy

A Bid‑Ask shape places two liquidity peaks on opposite sides of the current price, leaving a shallow valley or none at all, right at spot. Think of it as providing thick “bid” liquidity below and thick “ask” liquidity above, useful for strategies that buy low and sell high automatically as price swings.

• When to use: Highly volatile or mean‑reverting assets (e.g., meme coins) or whenever you want to run passive grid/DCA strategies.

• Strengths: Earn fees twice, once when price moves down into your lower peak (accumulating the asset) and again when it moves up into your upper peak (distributing it back). Effectively captures value from large oscillations.

• Trade‑offs: If price stabilizes in the mid‑zone, little or no liquidity is active, reducing fee income. Requires wider monitoring or adaptive shifting.

• Considerations: Higher exposure to impermanent loss if prices move significantly, as liquidity is concentrated at range extremes. LPs must be comfortable with volatility and active management.

Single-Sided Liquidity

Ferra’s DLMM supports single-sided liquidity, allowing LPs to provide only one token (e.g., USDC in bins below 3.00 to buy SUI if the price drops, or SUI in bins above 3.00 to sell if the price rises). This is particularly useful for:

• Token Launches: Projects can bootstrap liquidity with one token, facilitating early trading.

• Directional Strategies: LPs with bullish or bearish outlooks can position liquidity to capitalize on expected price movements.

• Example: An LP provides 3,000 USDC in bins at 2.90–2.95 USDC per SUI, enabling SUI purchases if the price drops, earning fees and accumulating SUI.

Liquidity Shape Example

The following is an example of liquidity distribution for the SUI/USDC pair, assuming the current SUI price is approximately 3.00 USDC.

Curve Strategy

Bid-ask Strategy

Spot Strategy

🔍 Shape Selector Quick Guide

🛠️ Pro Tips

• Stay in Active Bins: Fees accrue only when trades hit your bins.

• Mix & Match: Advanced LPs can split liquidity across multiple shapes in the same pool.

• Automate: Scripts or forthcoming Auto‑Vaults can auto‑shift curves as price moves.

• Monitor market volatility: Rising volatility usually means higher dynamic fees. When the market gets choppy, think about shifting your shape, harvesting fees, or tightening ranges to lock in more returns.