Total Volume + Fees
GM LPs! This week's market dip created a lot of trading volume and we are seeing spiking trading activity on Uniswap.
In a sea of nearly 20,000 Uniswap pools, this week one WETH pair has taken everyone by surprise generating more fees than any other pool - by far. WETH/SAVM, which has recently been the bane of meme-coin critics has generated $4.3 Million in the last 7 days with ~$3,753,000 currently in liquidity, nearly 4 times as much as the next most profitable pool.
This week on the docket:
Uniswap V2 model still makes sense
Farcasters LPing on Degen
Uni V4 Liquidity Locking Hook
Uni V2
The continued perseverance of Uni V2 has surprised everyone despite V3 theoretically being a better offering. In fact Uni V2's volume has risen over the last year, now having a TVL of nearly $1.6 Billion.
Recently we saw a research paper on Uniswap V2 by @atiselts, where he makes the case for why Uni V2 is still a good option.
The paper looks at WETH/USDC pool from multiple perspectives and concluded that despite toxic flow trades, MEV bots, LVR and impermanent loss, the pool remained profitable for LPs and popular choice due to it's lower risk profile.
This is signal that despite CLAMMs being used for most of the volume on Uniswap, V2 full range pools are still the choice for a lot of LPs looking to make safe bets and a Uniswap V4 hook based on this model, could be even more successful.
Degens on Farcaster
Meme-coins have a lot hidden impermanent loss inherent to them. While risky, we will be taking a look at another meme-coin spawning from a community known as the ETH maxi's Mensa, farcaster. More specifically we'll be looking at WETH/DEGEN pool on base and try to extract lessons from LPs.
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$degen is a community meme-coin originating from farcaster, a sufficiently decentralized network. Launched on Base L2, it quickly grew to one of the top meme-coins on the chain. It was the starting point for many people in their LP journey.
As of now the the 100 bps WETH/DEGEN pool has a TVL of ~$426,000. And it seems like most people are bullish on $degen or deploying full range LP positions.
A quick look at the positions tells us that LPing in degen is a short to medium term game, with most positions past 3 days in -ve PnL. The LPs are providing liquidity in hopes that the mining rewards offsets any of their losses. And most of the discussions are around mitigating IL while also staying in range for the rewards, which is why many opted for a full range position.
Below šš» is the one of the most integral team members of Base Chain's team fishing for LP tips!
ā¬ fees = narrow range = ā¬ IL
ā¬ IL = broad range = ā¬ fees
Still there are LPs who are making 3 digit APYs at narrow positions.
We went ahead and made an in-depth video tutorial for using PoolFish to add liquidity to the 0.3% pool.
There are plenty of small scale LPs who are trying out LPing for the first time with amounts less than < $500. And the tutorial above can take you through all the steps in minting your first LP position while also supporting a budding community. However, it should be considered as a high risk investment and you may want to keep watch over it.
Uni V4 Liquidity Locking Hook
We are a mere few months away from Uniswap Protocol's newest update to Version 4 which gives us the power of Hooks. Today we take a look at a hook from @BrokkrFinance
Bootstrapping liquidity is hard for new protocols and customers require locked liquidity for confidence. Thus, there is a need for a transparent method to lock in liquidity and to attract traders while sustaining a deep pool depth. At the same time it can be a method to award LPs for locking in liquidity.
"This hook lets pool deployers reward liquidity providers who lock their liquidity with additional token rewards by minting new ERC20 tokens."
This means locking liquidity, governance and mining rewards are done on-chain rather than trusting a third party to make those for you. LPs who lock their positions earn more points on them and receive them when they withdraw the LP. This also comes with a penalty to withdrawing your LP early on.
All of these are new paradigms that can be manifested in a number of ways to attract LPs and traders and ultimately grow a protocol.
The Uni V4 update is scheduled to arrive post-Ethereum upgrade in March. And we can't wait to see what it brings to the world of LPing!
Top Pools of the Week (Multiple Chains)
High-Risk
ETH/MOCHI & ETH/TOSHI on BASE in the exotic pairs category for the ones feeling adventurous.
Low-Risk
CELO/cUSD on CELO chain & ETH/WAVAX on AVALANCHE chain for the balanced swimmers.
Safe (PancakeSwap)
ETH/USDT for whose looking for a safe bet
That's a wrap for this week's LP news. Make sure you fiddle around on PoolFish to optimize your WETH/DEGEN LP strategy. And join us on the /degen farcaster channel to connect with like minded LPs!