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Teahouse Simmer Toolkit (TeST)
Our Performance Simulation and Testing Toolkit
To measure the profitability of each strategy, Teahouse established the coefficient of profitability: the coverage rate divided by the average width of liquidity provision price range. In general, the superior strategy will have the greater "hit rate", where the spot price is "in-range", while also having a narrower range. Teahouse is able to track the time-weighted average coverage of an existing liquidity strategy, Alpha Vault, and calculate the effectiveness of its strategies with the entire 90822 swaps to date (as of 07/10/2021) in the ETH/USDC v3 pool.

Alpha Vault Position Analysis

name
tick width
count
time weighted average coverage (*)
average coefficient (**)
Alpha Vault
600
16
27.57%
0.0004594963284
Alpha Vault
3660
13
97.81%
0.000267227483
Alpha Vault
1200
47
51.43%
0.0004285573861
Alpha Vault
7260
47
100.00%
0.0001377410468
(*) share of swaps that fall within the positions while active (liquidity > 0), weighted by the timespan of the positions in active state
(**) the coefficient of profitability equals coverage divided by tick width

The results show that a passive on-chain strategy isn't quite effective and it is exploitable to front-running.

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Alpha Vault Position Analysis