Total Volume + Fees
On the docket today
Multi-sided strategies for LPs
@HAY-den burns HAY and fees skyrocket!
Oku.trade challenging CEXs
Amidst the whispers of a Bitcoin ETF on the horizon and the rollercoaster ride of macro-economic volatility, cryptocurrency seas have roared to life. We've witnessed a 230% increase in LP fees as compared to last week, accompanied by a surge in impermanent loss as well.
Narrowly concentrated LPs are racing to recalibrate/rebalance their positions in the midst of this whirlwind.
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Meanwhile others are having their a-ha moments figuring out the importance of derivative LP markets and that LPs don't have to be confined to Delta-Neutral strategies.
According to @atiselsts.eth on twitter, LP returns should be an amalgamation of innovative fees + appreciation from traditional asset price movements, otherwise it doesn't make much sense to chase Defi/LP investing.
Many protocols offer delta-neutral farming, but what most users actually want is positive delta combined with neutral gamma. Asset exposure & intuitive payoff curve.
According to @guil_lambert, the founder of Panopic, the sentiment is that Concentrated LP inherently has properties of an option trade - not just the underlying asset price. But in the case of CLAMM LPs also benefit from spot trading. So it's another dimension of mutual benefit that is not possible on CEXs.
"It's absolutely possible to reduce impermanent loss while keeping the upside potential open."
At present, there's a wide array of strategies available for utilizing your LP tokens, extending beyond merely earning fees. And even more innovation on the horizon. These strategies offer a wealth of trading options and simultaneously address the issue of enhancing the efficiency of liquidity utilization. We'll list a few out here, and will be expounding upon them further in future editions :
Panopic enables permissionless trading of options on top of any asset pool in the Uniswap v3 ecosystem.
Infinity Pools is a decentralized exchange that can offer unlimited leverage on any asset, with no liquidations, no counterparty risk & no oracles.
Gamma Strategies is a protocol for active liquidity management and market-making, designed to maximize capital efficiency
Opyn capital efficient options trading strategies
$HAY-den and massive pool fees
Hayden Adams announced on twitter that he burned his entire amount of HAY(which constituted almost the entire supply), a token he launched to experiment with the initial Uniswap contracts.
This highly deflationary move skyrocketed the price of HAY to astronomical heights. And at the same time made it one of the top-most performing pools in terms of fees generated - nearly $370,000!
One person capitalizing on this opportunity made thousands of dollars and 4 digit APYs (now closed) while depositing a modest amount of liquidity. View their position here
Meanwhile, Uniswap Labs' new fee, which was implemented last week, has collectively generated nearly half a million dollars!
Other Uniswap protocol platforms don't necessarily have these fees. One such app is Oku.trade 👇🏼
Oku.trade and Uniswap V3
There are a myriad of Uniswap clones, Dex aggregators and other interfaces available today. However, they all serve almost the same function and leaves much to be desired for power users who are accustomed to the fine-tuned experience CEXs provide.
To address this, the Uniswap Foundation backed the creation of Oku.trade, a distinct DEX that elevates the DeFi user experience to match the polished standards of centralized exchanges.
Oku's founder, Getty, pointed out that current DEXes miss out on some essential features like order books, price charts, depth charts, trading history, and user order history. Oku, on the other hand, has managed to bring all these features to the table, putting it in the same league with CEXs while keeping its DEX identity intact.
Let's take a look how they have created limit orders on Oku; not by making it work like a stop order but instead using an incredibly narrow concentrated liquidity as the means to entirely convert your position from token A to your desired token B. i.e. an LP position concentrated at eg. $1000 to $1000. This makes the person placing the order a part of the liquidity market rather than just a trader.
Oku makes it super easy to create your custom pools as well as makes it intuitive to add liquidity.
Tucked away in the side menu is the option to deploy your own pools.👇🏼
Oku uses Chainlink for automations and handling events that read from the on chain data from Uniswap V3. Chainlink Automation can be used to manage onchain positions, specifically closing a position if the price drops below a certain point or volatility risks too much impermanent loss.
It can also be extended to multiple other use cases that are currently only native CEXs or independent developers coming up with their automations. Some use-cases that are on their way and Getty mentioned in his SmartCon talk are. :
Dollar Cost Average - Buy X amount of ETH in a time frame of Y in Z orders. DCA is a strategy that allows individuals to invest a fixed amount of money in an asset regularly, regardless of the asset's price, aiming to reduce the impact of volatility
Stop Loss Orders - if an asset recedes to a predetermined point, the stop-loss order automatically sells off the asset
Automated Liquidity - Getting your capital in concentrated range where the orders are being executed. Getty gives examples about a 5% range with the current price with rebalancing occurring every 2.5%. Moreover their integrations with Chainlink oracles allows them to sense when volatility gets too high which just removes the liquidity altogether
Smart Orders - Custom triggers that users can make themselves based on any criteria they want!
It's worth noting that all of these utilities indeed make use of on-chain liquidity which means -> more trading -> more fees LPs and a very efficiently working two sided marketplace. In the coming months Oku is also working on Uniswap V4 integrations which is going to make it even more exciting.
Top Pools of the Week
High-Risk
No surprises here!
ETH/HAY in the exotic pairs category for the ones feeling adventurous.
However it is worth noting that volatility is exceptionally high here...which is exactly why it is high risk.
Low-Risk
RBX/ETH for the balanced swimmers.
Safe
USDC/ETH in the 5bps category for the cautious paddlers.
Crypto is still experiencing volatility and massive price spikes. We will keep an eye out for more stuff pertaining to LPing and the ever evolving trends in DeFi. May your IL be lower than your PnL. Until next time!