We simulated LP performance for 21 popular Uni V3 pools (high TVL & volume). Results were surprising: LPs can be profitable! π’
- π° Which pools made the most?
- π Are narrow or wide ranges better?
Find out π
Backtest Strategyβ
Previously, we explored the ETH-USDC 30bps pool.
1/12 We analyzed simulated LP performance on ETH-USDC 0.3% pool.
β Panoptic (@Panoptic_xyz) February 2, 2023
Results were surprising:
π’ The optimal width was wider than expected.
β’ What's the optimal width for max returns?
β’ How does that change for π vs π» markets?
Find out π
For this study:
- ποΈ Jun 2021 - Jan 2023 (20 months) for most pools
- βοΈ Daily rebalancing
- π Narrow (r = 1.05) & wide (r = 1.75) ranges
Here's how other ETH-stablecoin pools compareπ
ETH-Stablecoin Poolsβ
Bad pools π (but can you spot the good pool πΆ?)
- 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)
L1/Utility Tokensβ
We lump some pools together and slap the label "L1/Utility Tokens" on 'em (see legend π for pool details)
Good pools:
- π MATIC (+66%, narrow)
- π LINK (+101%, narrow)
- π€© ENS (+124%, narrow)
Bad pools:
- π¦ WBTC (+2%, wide)
- π’ GNO (-1%, wide)
- π BTT (-28%, wide)
DeFi Tokensβ
Now for DeFi.
Good pools:
- π MKR (+9%, narrow)
- π 1INCH (+14%, narrow)
Bad pools:
- π AAVE (-7%, narrow)
- π UNI (-28%, narrow)
NFT/Meme Tokensβ
And NFT/Meme tokens???
Good pools:
- π APE (+28%, narrow)
- π€£ HEX (+209%, wide)
Bad pools:
- πΆ LOOKS (-4%, narrow)
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? π)
1/18 Read our latest: #ResearchBites from @brandonly1000 of the @Panoptic_xyz research team!
β Panoptic (@Panoptic_xyz) January 25, 2023
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How to hedge ANYTHING (including UniV3 LP positions) with options π
Summaryβ
Key Insights:
- π ETH-stablecoin pools underperformed (too popular?)
- π ERC20-ETH pools outperformed (not enough β€οΈ)
Common traits for outperforming strategies:
- Narrow LP range
- Minimal pool price change
- β¬οΈ Volume β¬οΈ TVL
Caveats:
- β½ Ignores gas/slippage/swap fees
- π Assumes fees/returns compound day-over-day
- β οΈ Past performance is no guarantee of future results!
Question:
- ππ» What if we LP with bullish or bearish bias? (Future #ResearchBites π)
I've created a couple of flowcharts to help beginners deploy+manage their @Uniswap v3 liquidity position.
β Guillaume Lambert | lambert.eth | π¦π (@guil_lambert) January 20, 2022
β’Part 1: Choosing a size+range for a given holding timeline βeg. 1d, 1w, 1 mo, 1y?
β’Part 2: Managing LP positions via daily checks βie. when to exit position+take profits pic.twitter.com/Y6mPe8Cp28
Disclaimer:
- π’ None of this should be taken as financial advice.
- β οΈ Past performance is no guarantee of future results!