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Conservation of Arbitrage Momentum

We explain the principle of conservation of arbitrage momentum, a concept that underlies Hypersea's unique liquidity management mechanism. We define the arbitrage momentum as the difference between the implied and realized volatilities of a trading pair, and explain how it can be used to estimate the optimal liquidity allocation across different pools.
We demonstrate how the conservation of arbitrage momentum allows Hypersea to effectively use and not lose the information that users contribute to the system through their trades. We discuss the advantages of this approach compared to other liquidity management strategies, and provide examples of how it can improve the overall performance and stability of the platform.