⚖️ Liquidity Management
Hikari uses a concentrated liquidity pool (similar to Uniswap V3) to support efficient trading and enforce the floor price guarantee. To keep liquidity aligned with the market, Hikari features automated rebalancing mechanisms that adjust the range whenever price drifts too far.
🎯 Goal of Liquidity Management
The objective is to keep most of the liquidity centered around the current market price while maintaining redemption guarantees at the floor price.
This ensures:
Efficient swaps with minimal slippage
Strong price protection near the floor price
Capital-efficient use of anchor liquidity
🔁 Rebalancing Triggers
Hikari uses four core functions to keep liquidity centered around the current price while maintaining a price floor. These functions adjust liquidity positions automatically based on market movements:
1. ⬇️ PullDown() - Price drops below range
What it does:
Burns excess KARI tokens in the pool
Pulls liquidity lower to match the new price
Why it happens: When the market dumps and the current price falls below the lowest point of the liquidity range
Example: Imagine KARI is trading at $1.00, but a large sell order drops the price to $0.85 — below the active liquidity. PullDown kicks in, burns KARI, and shifts liquidity down to re-cover the new lower price, allowing trades to continue
2. ⬆️ PushUp() - Price rises above range
What it does:
Mints new KARI tokens
Push liquidity up to match new price
Why it happens: When demand pushes the price above the top of the current liquidity range
Example: KARI pumps from $1.00 to $1.20, surpassing the top range of the liqudity pool. PushUp mints new KARI to meet demand and sells it at the higher price, bringing in AUSD to strengthen the system
3. FloorRaise() - Price drifts upward inside range
What it does:
Slides the entire floor liquidity range upward
No minting or burning
Why it happens: When there is enough surplus of liquidity to buyback the entire circulating supply of tokens at a new higher price
Example: KARI moves from $1.00 to $1.08 over time. FloorRaise shifts the liquidity slightly upward so it stays centered around the new price. The floor price rises with it.
4. Drop() - Price drifts downward inside range
What it does:
Slides the entire liquidity range downward
No minting or burning
Why it happens: When price slowly drifts downward but remains inside the current range
Example: KARI declines from $1.00 to $0.95. Drop re-centers the liquidity downward to keep coverage aligned with market activity and protect the floor
Each of these functions ensures Hikari’s concentrated liquidity stays active and efficient — always supporting price discovery while preserving the protocol's guarantee of a price floor.
🧩 Why This Matters
Without rebalancing, liquidity would lag behind the price, causing slippage and weakening the floor price guarantee.
Hikari’s automated system ensures:
Liquidity always tracks the price
The protocol reacts to both hype and panic
Users can trade confidently, knowing price stability is backed by design
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