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How To Make a Market for a Stablecoin

This guide shows you how to setup the kelp bot using the buysell strategy. We'll configure it to make a market for a stablecoin against the XLM asset.

This strategy buys low and sells high with a pre-defined spread and priceFeed.

Account Setup

First, go through the Account Setup guide to set up your Stellar accounts and the necessary configuration file, trader.cfg. This introduces the COUPON token that we will use through the rest of this walkthrough.

Install Bots

Download the pre-compiled binaries for kelp for your platform from the Github Releases Page. If you have downloaded the correct version for your platform you can run it directly.

BuySell Strategy Configuration

Use the sample configuration file for the buysell strategy as a template. We will walkthrough the configuration parameters below.

Price Feeds

BuySell requires two price feeds and computes its final trading price by combining these price feeds as price(A)/price(B).

To give COUPON a stable price against USD, we're going to connect feed A to the priceFeed from Kraken, the popular custodial exchange. We set the DATA_TYPE_A to "exchange" and DATA_FEED_A_URL to "kraken/XXLM/ZUSD". This points our bot to Kraken's price for 1 XLM, quoted in USD.

We always want to price our stablecoin at Kraken's XLM/USD price. Since that's already what we're getting in feed A, we want to set price feed B to 1.0. We do this by setting DATA_TYPE_B to "fixed" and DATA_FEED_B_URL to "1.0".

Tolerances

For the purposes of this walkthrough, we set the PRICE_TOLERANCE and AMOUNT_TOLERANCE thresholds for our bot to be as small as possible because we want it to make a lot of trades. We set the value for both fields to 0.001 which means that a 0.1% change in price or amount will trigger the bot to refresh its orders. In practice, you should set any value you're comfortable with.

Levels

A level defines a layer that sits in the orderbook. Each level has an AMOUNT and a SPREAD as part of its configuration. The bot creates mirrored orders on both the buy side and the sell side for each level configured.

level screenshot

AMOUNT_OF_A_BASE allows you to scale the order size levels explained below. Trade amounts are specified in units of the base asset (i.e. ASSET_CODE_A).

  • SPREAD: represents the distance from the mid price as a percentage specified as a decimal number (0 < spread < 1.00). The bid/ask spread will be 2x what is specified at each level in the config.
  • AMOUNT: specifies the order size in multiples of the base unit described above. This AMOUNT is multiplied by the AMOUNT_OF_A_BASE field to give the final amount. The amount for the quote asset is derived using this value and the computed price at this level.

Run Kelp

Assuming your botConfig is called trader.cfg and your strategy config is called buysell.cfg, you can run kelp with the following command:

kelp trade --botConf ./path/trader.cfg --strategy buysell --stratConf ./path/buysell.cfg

Above and Beyond

You can also play around with the configuration parameters of the sample configuration file for the buysell strategy, look at some of the other strategies that are available out-of-the-box or dig into the code and create your own strategy.