LINK/USDC Delta-Neutral Market Maker

Delta-neutral market making bot that provides concentrated liquidity on Uniswap V3 (Optimism) and hedges directional risk on HyperLiquid perpetuals.

Strategy

Earn LP fees from a Uniswap V3 LINK/USDC pool while staying delta-neutral:

1. Provide liquidity in a concentrated range on our own Uniswap V3 pool (0.05% fee tier)
2. Arbitrage our pool's price back to the market (HyperLiquid) whenever it drifts
3. Hedge net LINK exposure on HyperLiquid perps to eliminate directional risk

Profit comes from LP fees. The arb protects against adverse selection, and the hedge removes price risk.

Architecture

graph TB
    subgraph "Optimism Chain"
        LP[Uniswap V3 LP Position<br/>LINK/USDC 0.05%]
        POOL[(Our Pool<br/>0x2eD8...Ed)]
        ARB_WALLET[Arb Wallet<br/>USDC + LINK]
    end

    subgraph "HyperLiquid"
        HL_PERP[LINK Perpetual<br/>Short/Long Hedge]
    end

    subgraph "Bot - Main Loop (2s)"
        SCAN[Scan<br/>Compare prices]
        ARB_ENGINE[Arbitrageur<br/>Correct pool price]
        EXPOSURE[Exposure Scanner<br/>Calculate net delta]
        HEDGER[Hedger<br/>Neutralize on HL]
    end

    subgraph "APIs"
        UNI_API[Uniswap Trading API<br/>Quotes & routing]
        HL_API[HyperLiquid API<br/>L2 book & orders]
        RPC[QuickNode RPC<br/>On-chain reads]
    end

    SCAN -->|"spread > 5 bps?"| ARB_ENGINE
    ARB_ENGINE -->|"SwapRouter<br/>exactInputSingle"| POOL
    POOL --- LP
    ARB_WALLET -->|"USDC or LINK"| POOL

    SCAN -->|"get effective price"| UNI_API
    SCAN -->|"get mid price"| HL_API

    ARB_ENGINE --> EXPOSURE
    EXPOSURE -->|"read balances"| RPC
    EXPOSURE -->|"|net delta| > $10?"| HEDGER
    HEDGER -->|"market order"| HL_PERP

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Main Loop

flowchart LR
    A[Get HL Price<br/>L2 book mid] --> B[Get Uni Price<br/>Trading API quote]
    B --> C{Spread > 5 bps?}
    C -->|No| G[Sleep 2s]
    C -->|Yes| D[Arb Swap<br/>SwapRouter -> our pool]
    D --> E[Scan Exposure<br/>arb wallet + LP + HL]
    E --> F{Net delta > $10?}
    F -->|No| G
    F -->|Yes| H[Hedge on HL<br/>market order]
    H --> G
    G --> A

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Key Design Decisions

Why Trading API for price discovery?

The API's /quote endpoint gives a realistic effective price accounting for routing, slippage, and fees — better than raw slot0 for spread calculation. We call it every scan cycle to detect mispricing accurately.

Why Trading API for rebalancing?

Rebalancing the arb wallet to 50/50 doesn't need to hit our pool specifically. The API finds the best price across all LINK/USDC liquidity on Optimism, minimizing slippage.

Exposure = on-chain delta + HL position

The hedger calculates net exposure across all three components:

• Arb wallet LINK (long) and USDC
• LP position token amounts + unclaimed fees
• Existing HL perp position

Only hedges the residual, preventing oscillation.

Components

File	Role
main.py	Main loop — arb scan, exposure check, hedge
arbitrage_engine.py	Detects mispricing, executes arb via SwapRouter
exposure_scanner.py	Calculates net LINK delta across arb + LP + HL
hedger.py	Adjusts HL perp to neutralize exposure
executor.py	Trade execution — SwapRouter, Uniswap API, HL orders
uniswap_client.py	Pool reads (RPC) + quotes (Trading API)
hyperliquid_client.py	HL price feeds + L2 book
balance_tracker.py	Balance monitoring across all three venues
gas_estimator.py	Optimism gas cost estimation
rebalance.py	Manual 50/50 rebalance via Uniswap Trading API
config.py	All parameters and addresses

Configuration

Parameter	Default	Description
ARB_THRESHOLD_BPS	5	Minimum spread (bps) to trigger arb
HEDGE_EXPOSURE_THRESHOLD_USD	$10	Minimum net delta to trigger hedge
MAX_ARB_TRADE_USD	$5	Maximum single arb trade
MIN_ARB_TRADE_USD	$1	Minimum arb trade (below = skip)
SLIPPAGE_TOLERANCE	50%	Loose for testing
POLL_INTERVAL_SECONDS	2	Main loop interval

API Usage Per Cycle

API	Calls	Purpose
Uniswap Trading API	1 /quote	Price discovery (every scan)
Uniswap Trading API	2-3	On arb execution: /check_approval + /quote + /swap (rebalance only)
HyperLiquid API	1 l2Book	Reference price
HyperLiquid API	1-2	On hedge: clearinghouseState + market order
QuickNode RPC	~8	slot0, balanceOf, LP position reads

Setup

# Install dependencies
pip install web3 eth-account requests python-dotenv hyperliquid-python-sdk

# Configure .env
cp .env.example .env
# Fill in: PRIVATE_KEY, HL_PRIVATE_KEY, HL_WALLET_ADDRESS, LP_WALLET_ADDRESS, UNISWAP_API_KEY

# Check balances
python balance_tracker.py

# Check exposure
python exposure_scanner.py

# Rebalance arb wallet (dry run)
python rebalance.py

# Rebalance arb wallet (execute)
python rebalance.py --execute

# Run the bot
python main.py

Startup Checks

The bot verifies on startup:

1. Uniswap pool connectivity (reads slot0)
2. HyperLiquid API connectivity (reads mid price)
3. Full exposure scan (arb wallet + LP + HL position)
4. Warns if net exposure exceeds hedge threshold (hedger corrects on first cycle)

Contracts

Contract	Address	Network
LINK/USDC Pool (0.05%)	0x2eD85aD8093FdefF2f5B0b1CfcA560dDc03c48Ed	Optimism
SwapRouter	0xE592427A0AEce92De3Edee1F18E0157C05861564	Optimism
NonfungiblePositionManager	0xC36442b4a4522E871399CD717aBDD847Ab11FE88	Optimism
LINK	0x350a791Bfc2C21F9Ed5d10980Dad2e2638FFa7f6	Optimism
USDC	0x0b2C639c533813f4Aa9D7837CAf62653d097Ff85	Optimism