The markets have been swinging the past two weeks and Defi activity on Uniswap is now nearing the highs of the previous bull market. The Dencun update for Ethereum has been a smashing success with people enjoying sub 1 cent transfers, which leaves more on the table for LPs as now trading becomes less painful and in turn more frequent. The Optimism Superchain and other L2s built on it have seen the most decrease in gas fees, hence the trading volume on these have been substantially increasing.
LP fees are also rising with more and more LPs now entering positions as safety net since rumors are floating of correction/bull-run over with the Fear and Greed index hovering around ~90/100. How it plays from here is anyone's bet.
Uniswap's price has remained consistent despite the rejection of the protocol fee proposal. However it is still possible to see a lot of price action for UNI/WETH pools since anticipation of Uni V4 is at an all time high since Dencun, its precursor has been achieved. However, for the time being, trading volume has slowed down and LP fees for the past 7 days shrunk since we last covered it.
At the same time some new projects have been picking up on ETH L1. Most of the volume was catered to by ETH,BTC and stable coins, however a few standouts this week were:
WETH/GNUS Genius Token & NFT Collections - ~735,000 in LP fees
RBN/USDC Ribbon Finance generated nearly $490,000 in LP fees.
This week we also saw Maker DAO reach the LP leaderboard. MKR's creation, DAI is experiencing adoption on a massive scale as stable coin lending reaches record rates. WETH/MKR has generated LPs $563,333 with 2354 trades on L1 ETH this week. WETH/DAI pair is also doing good numbers with 3,906 trades and $132,928 in fees.
One cult classic that has spawned a culture of its own; $ZYN is also in our LP leaderboard.
With WETH/ZYN doing 1,853 and generating $43,264 in the 0.3% pool on Uniswap.
Auction-Managed AMM
Since the change to Uniswap Factory contracts was rejected in the proposal, partly because that could open the Uniswap team to litigation charges (for now), Uniswap Hooks remain the only method to radically change revenue model and higher fees for LPs.
Dan Robinson et al. released an Auction-Managed AMM research paper, which according to their hypothesis would perform better than fixed-fee AMMs. Their approach target both reducing losses to informed Orderflow (LVR), and maximizing revenue from uninformed Orderflow (MEV).
Their model suggests auctioning off special privileges to a temporary Pool Manager who can set the swap fee and have the special privilege to capture MEV before the toxic flows show up (or "noise trader fees"). The LPs get to make a fixed/determined fee and no MEV bots can scoop up the imbalances of the pool
They also go over drawbacks of this model that includes an increased risk from sandwich attacks from the auction winner who can effectively trade without worrying about fees and can front run the big trades but they also propose solutions that may be integrated in the next version of the paper.
Base Trading Volume and a DEGEN party
Base has quickly integrated itself inside the L2 sphere of conversation and is now at the cusp of becoming one of the fastest growing consumer chain backed by the giant Coinbase. LPs on L2s like Base are central to this and have been raking it in.
And L2s in general are good for everyone.
Base could very well become the hub for meme-coin circulation on the EVM but for LPs of course, with meme-coins comes a lot of risk for impermanent loss especially if degens start making good trades.
Base LP fees and Volume are on a climb since even before their fees got slashed to nothing and LPs couldn't be happier with nearly 1600 LP positions opened in the last 24 hours.
For example a new meme-coin pair WETH/NORMIE has the following LPs who are doing good especially the more concentrated ones.
Other than $NORMIE there's a whole lot of LP action going on Base. $DEGEN has been nearly a 3 month project now with one of the longest list of LPs out there. While most passive LPs are not in profit, some active ones and who were smart enough to choose an initial good range have more than doubled their money.
We hope to be one of these lucky LPs with our new project of providing LP to the WETH/DEGEN pool as collective party of many LPs. Over the weeks we will be distilling our insights and lessons about LPing.
Here is the position we have taken in WETH/DEGEN 0.3% pool.
The current price of DEGEN/WETH is
The ranges are calibrated so that we are entering with a majority stake in ETH which is a smart strategy considering volatility in DEGEN
MIN -> 792,795.706 DEGEN WETH
MAX -> 19,061,132.2 DEGEN WETH
We may have to update these as time goes on and $DEGEN's price action makes it out of range for our position.
Note that the ref_value is USD and not HOLD
When we take a look at the HOLD value of our position in the 0.30% tier pool, we already have a healthy 263% fee_APR and since $DEGEN is now becoming a building block for other apps, we hope to still be in range for when it surges.
There is a ton on the way as we don't intend to leave this position in a passive manner and will be experimenting with in any way that the current Defi system allows. That includes automation of LP like Aperture Finance, providing loans and leverage to degens, leveraging it ourselves using YLDR and any other on-chain activity that comes under the ambit of LPing. So keep coming back to see how we are doing!
Top Pools Of The Week
High-Risk
--BASE--
DOGINME/ETH & ETH/BRETT in the exotic pairs category for the ones feeling adventurous.
ETH/BRETT has an astounding forecasted APY, and the volatility allows some LPs to make very healthy fees.
Low-Risk
--Ethereum--
has been consistently in the LP highlights for the past few weeks.
Ironically enough the top pair with the highest LP fees in our low-risk category is ETH/SOL, which of'course is a meme-coin and not the real deal. 🐧
Safe
--ETHEREUM--
WBTC/USDT & ETH/USDT for the safe paddlers
This is a point in the bull-run that many say it has topped, others say completely the opposite and any time put into figuring out which is correct is time that could be spent on LPing.
Remember to follow our DEGEN LP journey!
See you next week LPs 🙋🏻♀️