Application Case: Maximising your Uniswap V3 Return of MKR-ETH!

According to the whole situation of the MKR-ETH 0.3% pool on Uniswap V3, most of the LPs are not doing well. The pool’s 24-hour trading volume stays low compared with Uniswap V2, on which liquidity is distributed evenly along the price curve. We can generate information based on Universe LP ranking to find current problems.

Information of pools on V2 and V3 Analytics

MKR-ETH 0.3% pool on Uniswap V3 at 2:30 AM UTC+0, Dec.16th, 2021

As we can see from the Uniswap V3 analytics, with $14.39 million TVL in the MKR-ETH 0.3% pool, most of them are currently out of range. Many LPs in this pool stop earning trading fees and are exposed to impermanent losses.

MKR-ETH pool on Uniswap V3 (2:30 AM UTC+0, Dec.16th, 2021)

Compared with the MKR-ETH pair on Uniswap V2, which is doing $188.002k volume on $15.35 million TVL, MKR-ETH 0.3% pool on Uniswap V3 is doing $169.34k volume on $14.39 million TVL. The 24-hour trading volume of the pool on V3 is relatively small, considering that the concentrated liquidity of V3 could provide better capital efficiency.

As per the stats by V2 and V3, LPs in the V3 pool don’t perform well. We can find more details about how LPs perform in the MKR-ETH 0.3% pool using Universe LP Analytics.

Information on Universe LP Rankings

Universe LP Rankings consist of three lists by liquidity, profits, and loss. We will update the data at 00:00 (UTC+0) every day. The ranking lists tell us the whole picture of the MKR-ETH 0.3% pool.

Top liquidity providers by liquidity (2:30 AM UTC+0, Dec.16th, 2021)

Most of the LPs who provide large amounts of liquidity are losing money. When we view their performance reports, we can find out that most of the liquidity is out of range. Moreover, some LPs who stay in range still suffer losses because they keep their range quite loose.

LP performance report, NFT ID#37132

Scrolling down to view the following pages, we may find some LPs who provide less liquidity but earn higher returns. It is an efficient way to spot the LPs that may provide valuable strategies.

Top liquidity providers by liquidity (2:30 AM UTC+0, Dec.16th, 2021)

We can also generate some information by comparing specified indicators of profit and loss ranking lists.

Top liquidity providers by profit (2:30 AM UTC+0, Dec.16th, 2021)

Top liquidity providers by loss (2:30 AM UTC+0, Dec.16th, 2021)

Many LPs on the first page of the profit ranking list no longer provide liquidity in the MKR-ETH 0.3% pool. So comparing the net profits of random LPs on the profit ranking list may not be helpful in the current market situation. We need to pay attention to some effective indicators.

Active liquidity is a new concept brought about by Uniswap V3. LPs are expected to continuously update their price ranges to cover the current market price. So do the amounts of activities represent the performance of an LP? Compared with LPs who suffer the most losses, the total activities of LPs who boost the most returns don’t seem to be more. The number of activities may not be the key to high yields.

What conclusions we can draw from the data

• Comparing the profits and liquidity amounts of two or more LPs on the ranking list is an efficient way to spot skilled LPs;

• Being active doesn’t mean frequent rebalance and reinvestment. Following the price to make adjustments may lead to huge losses, especially during the market fluctuation;

• Choosing an appropriate price range is of great importance to boosting yields. It can avoid unnecessary adjustments and gas fees. Universe Finance’s backtesting platform can be used in conjunction with LP Analytics to help users find a suitable price range and improve their strategies;

• The timing of rebalancing can help us judge how well an LP performs. Every rebalance shows an LP’s understanding of the market. It is a more meaningful indicator than the total activities of an LP.