Thread by @RenCryptoFish

@VisorFinance's simple moving average liquidity provision strategy provides the inverse payoff of "trend followers." In tradfi we call them CTAs, they manage hundreds of billions (@JessicaNutt96 & @choffstein will probably be familiar with this, cross over episode!)

Trend following is a simple systematic strategy. Price up buy, price down sell. The payoff is similar to being long a straddle because you rebalance your position as you lose money, acting as a natural stop loss.

The longer the trend window, the slower you rebalance but the larger the payoffs and vice versa (read more about it from one practitioner group's perspective thierry-roncalli.com/download/Momen…)

In periods of large persistent market moves, trend followers do well. In range bound periods, its death by a thousand paper cuts. Tradfi CTAs tend to be pretty slow trend followers 6 - 12 months usually

Why would people pay for this? Because in tradfi, marketing strategies with the argument that they payoff in big downswings as a tail hedge works well especially if you have academic support. In reality CTAs have had a rough time, so if you want a real tail hedge @bennpeifert

The interesting aspect of @GammaStrategies on @Uniswap v3 is that it's offering you the ability to capture UNI fees within two bollinger bands, which is basically just getting paid by $UNI fees if price doesn't move beyond K standard deviations from a N period moving average

So when trend followers get paid (ie, when the trend breaks out), the LP take "impermanent loss" . When the trend followers rebalance, the LP earns fees. In crypto the cycles are a lot faster (days/weeks not years), but there are still lots of trend followers.

If you ape into a coin because the price went up, you're a trend follower. If you get scared when price goes down and sell, you're a trend follower and also have paper hands 🧻🤲

Lots more to think about but I wouldn't be surprised if moving average LP passive strategies become a premium that retail can harvest at scale. The payoff is also not just ~return, but ~volume as well @_Dave__White_ Also opportunities to compose with other structured payouts 👀

How you calibrate these passive LP strategies is not a solved problem either (@GammaStrategies, depending on the autocorrelation structure/gas price/utility of LPs, there would be benefits of diversifying moving average time periods)