Love the "Uniswap liquidity plunges" clickbait.
Facts: 4 Uniswap pools had more liquidity than needed to facilitate trading, & the excess liquidity left once $UNI farming ended. This doesn't affect volumes. TVL is pointless for Uniswap when there is more capital than needed.👇
Facts: 4 Uniswap pools had more liquidity than needed to facilitate trading, & the excess liquidity left once $UNI farming ended. This doesn't affect volumes. TVL is pointless for Uniswap when there is more capital than needed.👇
Uniswap's TVL started going up at the end of August, & has now "crashed" back down to where it was 3 months ago.
But Uniswap's volumes peaked BEFORE TVL even increased, & volumes went down while TVL went up.
Volumes & TVL are not correlated when there is excess capital.
But Uniswap's volumes peaked BEFORE TVL even increased, & volumes went down while TVL went up.
Volumes & TVL are not correlated when there is excess capital.
Yes, LPs are critical to Uniswap's success, but go look at CoinFlex if you think incentivizing market makers is the secret to success (hint, it isn't). You need customers too, and Uniswap's customers are much stickier than the LPs.
As long as customers show up, LPs will stay.
As long as customers show up, LPs will stay.
How best to think about excess liquidity? If I have 20 chairs, but only 5 guests, does it matter if I add or subtract 5 chairs? No.
This is what $UNI liquidity mining did. It added excess capital to pools that didn't need it, & that excess unproductive capital is now gone.
This is what $UNI liquidity mining did. It added excess capital to pools that didn't need it, & that excess unproductive capital is now gone.
If $UNI liquidity mining is going to continue it needs to be smaller, targeted, & goal oriented (i.e incentivizing a WBTC pool to allow for BTC to be traded in a liquid decentralized fashion). LM incentives can be powerful, but without a goal & analysis, it is just inflation.
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