As cryptocurrencies turn onto the bigger trading stage, projects, investors, venture capitalists, and many more are looking for new avenues to keep the trading risks at bay. This is where liquidity management platforms come in.

Looking at liquidity management from the perspective of the centralized world, wall street aficionados refer to liquidity as the ability to trade an asset like a stock or bond at its current price.

But since gears are shifting towards the potential held by decentralization, the changes are also seen in the form of liquidity experienced in this sphere of finance. A blockchain project is viewed as an organization in its own right, and these projects are evaluated on their liquidity. This has to do with a specific project’s ability to meet its cash and collateral obligations without incurring substantial losses.

A liquidity management platform works towards reducing liquidity risk exposure of these blockchain projects.

A Deep Dive into Active Liquidity Management

To start with, let’s review what Uniswap V3 is all about as this will come up later on. For those that have provided liquidity on Uniswap before, V3 liquidity providers (LPs) can now concentrate their capital within custom price ranges, providing greater amounts of liquidity at desired prices. As a Uniswap V3 LP, you are free to concentrate your capital in the price range you believe will generate you the highest return.

Now, the crypto space has several active liquidity management platforms like Gamma, Visor, and Universe Finance that employ various unique techniques to maximize Uniswap V3 investor returns. Without these platforms, then Uniswap V3 has to actively increase the liquidity of their portfolios in response to any negative and exogenous shock to investor flows.

The management platforms use a few strategies such as smart contracts, cash holdings, and/or equity to adjust their portfolio liquidity whenever the project is subjected to unexpected or sudden withdrawals.

Bringing this tool to the decentralized world acts as an effective tool that organizations like Universe Finance can use to minimize the cost imposed by redemption obligations. This is why you find projects like Uniswap V3 that are actively managing their liquidity with such platforms in the background will significantly outperform other swaps to a greater degree if they are less-liquidity focused.

Why Universe Finance Stands Out

As explained, several active liquidity management platforms exist; however, this is a niche that relies on high accuracy and every firm has to ensure it employs devices that make it take the liquidity management lead.

Universe Finance is an active liquidity management platform of Uniswap V3 based on risk ranking and quantitative strategies. Their mission is to maximize their users’ Uniswap V3 return. Universe focuses on coming up with new, strategic approaches to finance that leverage a wide set of automated processes and analytical insights to achieve better financial outcomes, even when market conditions get volatile.

The firm has provided a series of products and some proactive liquidity management tools to meet challenges such as increased risk, expensive gas fees, the timing and frequency of rebalancing and reinvestment.

The three pillars driving Universe Finance ahead of the pack include:

Risk Grading

Regardless of an LP’s risk appetite, Universe employs a series of products to meet their needs.

Quantitative Strategies

As LPs lean towards maximizing their returns, Universe Finance comes up with trading strategies based on quantitative analysis which rely on number crunching and mathematical computations to identify the best opportunities in the market.

Programmable liquidity management

Coupled with the platform’s intelligent quantitative management strategies, they also have a programmable liquidity protocol which works without any human intervention, while still meeting LPs’ needs.

Projects Need Active Liquidity Management

Big projects like Uniswap need active liquidity management because they are subjected to heavy stress tests and regulation to assess their progress because they are considered an economically vital institution. No one can predict the direction the market might take, which means projects can face sudden and unexpected outflows.

Active liquidity management comes in as a feature that helps project’s balance growth and risk thanks to data-driven intelligence, connectivity, and real-time visibility. Thanks to platforms like Universe Finance delivering on their capabilities, Uniswap V3 liquidity providers can see how their financial resources are protected, while effectively optimizing cash preservation and generation. More on Universe finance here: Website, Twitter, Discord, Gitbook