Thanks for the reply and trying to explain.

It sounds like the swap math completely changes above the limit, I’m curious how the LP continues to price both tokens once it keeps selling DEC at soft peg and it can’t keep both assets in equilibrium balance anymore?

Say we have $100 in each asset at peg.
Dec increases and someone buys $25 in DEC - normally that would push the LP’ DEC price up to equilibrium but you are saying that doesn’t happen - instead the LP keeps $25 of DEC at peg and $125 of USDC. I’m just guessing either it keeps buying/selling both assets at the limit price, or maybe the pool shrinks automatically (withdrawing USDC proportionally)

How does the LP revert back from the 125/25 imbalance when Dec demand abates and people start selling back into the pool at soft peg?