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Maximizing Profits on Uniswap V3: 21 Popular Pools LPed

Brandon Ly

We simulated LP performance for 21 popular Uni V3 pools (high TVL & volume). Results were surprising: LPs can be profitable! 📢

  • 💰 Which pools made the most?
  • 📏 Are narrow or wide ranges better?

Find out 👇

Backtest Strategy
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Previously, we explored the ETH-USDC 30bps pool.

For this study:

  • 🗓️ Jun 2021 - Jan 2023 (20 months) for most pools
  • ⚖️ Daily rebalancing
  • 📏 Narrow (r = 1.05) & wide (r = 1.75) ranges

Here's how other ETH-stablecoin pools compare👇

ETH-Stablecoin Pools
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Bad pools 😔 (but can you spot the good pool 🐶?)

  • ETH-USDC (5bps): -18%
  • ETH-DAI (30bps): -14%
  • ETH-USDC (30bps): -12%
  • ETH-USDT (30bps): -11%
  • ETH-USDC (100bps): -9%
  • ETH-USDC (1bp): -6%
  • ETH-USDT (5bps): -3%
  • ETH-DAI (5bps): +7%

(Returns in stablecoin)

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L1/Utility Tokens
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We lump some pools together and slap the label "L1/Utility Tokens" on 'em (see legend 👇 for pool details)

Good pools:

  • 😊 MATIC (+66%, narrow)
  • 😍 LINK (+101%, narrow)
  • 🤩 ENS (+124%, narrow)

Bad pools:

  • 😦 WBTC (+2%, wide)
  • 😢 GNO (-1%, wide)
  • 😭 BTT (-28%, wide)

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DeFi Tokens
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Now for DeFi.

Good pools:

  • 🙂 MKR (+9%, narrow)
  • 😎 1INCH (+14%, narrow)

Bad pools:

  • 😕 AAVE (-7%, narrow)
  • 🙁 UNI (-28%, narrow)

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NFT/Meme Tokens
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And NFT/Meme tokens???

Good pools:

  • 😅 APE (+28%, narrow)
  • 🤣 HEX (+209%, wide)

Bad pools:

  • 😶 LOOKS (-4%, narrow)

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For ERC20-ETH pools, returns are in ETH. Even if we earn 209% in ETH, if ETH price in $ is falling, we might lose in terms of $. But you can always hedge by shorting ETH! (Panoptic sooon!)

(What if we calculated returns in the ERC20 token...future #ResearchBites? 😉)

Summary
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Key Insights:

  • 💀 78\frac{7}{8} ETH-stablecoin pools underperformed (too popular?)
  • 🏆 813\frac{8}{13} ERC20-ETH pools outperformed (not enough ❤️)

Common traits for outperforming strategies:

  • Narrow LP range
  • Minimal pool price change
  • ⬆️ Volume ⬇️ TVL

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Caveats:

  • ⛽ Ignores gas/slippage/swap fees
  • 📈 Assumes fees/returns compound day-over-day
  • ⚠️ Past performance is no guarantee of future results!

Question:

  • 🐂🐻 What if we LP with bullish or bearish bias? (Future #ResearchBites 😉)

Disclaimer:

  • 📢 None of this should be taken as financial advice.
  • ⚠️ Past performance is no guarantee of future results!
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