A tight stablecoin liquidity band can be deep and fragile

A narrow liquidity band can make a stablecoin pair exceptionally deep near its usual exchange rate while offering much less support outside that band. Evaluate both the local depth and the capacity along the actual trade path.

A band is an execution condition

Assume hypothetical positions concentrate between exchange rates 0.999 and 1.001. A small swap starting at 1.000 may stay within that region and receive a tight quote. If the market begins at 0.995, those same positions may be out of range.

The deposited assets have not necessarily vanished, but they no longer provide the same local capacity at 0.995. Concentrated liquidity activates according to price ranges, rather than the token's intended peg.

Inspect two kinds of stress

A large trade can exhaust the useful near-price region even when the starting price is close to parity. A smaller trade can also face weak depth after the starting price has already moved outside the dense band. Those are different scenarios and deserve separate quotes.

Do not extrapolate a historical near-peg depth measurement into a displaced market. Record the starting exchange rate and range distribution used by the measurement.

What a good comparison reports

Show output at the intended size under the current state. If useful, add clearly hypothetical displaced-price scenarios using a consistent liquidity distribution. State whether liquidity providers are assumed to leave positions unchanged or to reposition; these assumptions can lead to very different results.

A concentration strategy can improve ordinary near-peg execution, but that benefit is conditional. The swapper's question is how much output is available now and before the trade reaches the next meaningful boundary. A large total balance or a stablecoin name is not enough to answer it, especially when the current exchange rate is outside the region where capital was concentrated.