Half of Uniswap liquidity providers are losing more money than HODLers are following the new liquidity report we have on the latest crypto news today.
The assumption that all liquidity providers make huge profits by sending money through various Defi protocols like Compound and Uniswap has been refuted in a new study by Topaze Blue and the Defi Bancor platform. According to the new survey, half of Uniswap liquidity providers on Uniswap V3 end up losing money by making a profit by just holding the asset. This is the result of temporary losses from transaction fees in different pools, the report added. The study focused on the activities related to Uniswap V2 from May to September of this year.
In the study, we see more than 17,000 wallets from liquidity providers analyzed on the platform and a total of 17 pools, including COMP / ETH, MATIC / ETH, USDC / ETH, were also observed. Of the $ 108.5 billion in total trading volume recorded for these pools, fees were $ 199 million, and while all of this may have been a win for LPs, the loss erased about 80% of fee income of the groups, with $ 260 million generated separately. On that basis, users suffered a loss of $ 60 million while 49.5% of liquidity providers posted a loss. The report also states, over a $ 100 fee, that the user incurs a loss of $ 180, which is an end-of-life loss of $ 80. According to the study, MATIC / ETH 51%, USDC / ETH 62%, COMP / ETH 59%, and MKR / ETH 74% are pools that have seen large temporary losses. The report states:
“Our main finding was that overall, and for almost all of the groups analyzed, the temporary losses outweighed the fees earned during this period.”
The study also looked at whether LPs make more profits than LPs, which differ between different trading styles. For this segment, the researchers made several comparisons between active users and traders who only regularly adjust positions with passive users who hold their assets over a long period of time.
However, there is no statistical evidence that these active traders make more profit than the passive ones, as IL rises faster than fees in all categories. The only group of users making more money are just-in-time traders who benefit pretty much from adding liquidity to a single block and removing deposits before a loss occurs.