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28 May, 17 tweets, 7 min read
This is a great thread which uses the on-chain data from last weeks to prove that passive LP strategies on $UNI v3 will be substantially outperformed by active LP strategies (e.g. developed by @VisorFinance). Let me add a few comments to emphasize how big this difference can be.
TL;DR:
- Current comparisons of LP strategies in $UNI v3 overoptimistically present performance of passive ones.
- Passive LPing doesn't stand a chance vs active.
- Bullish on active LP strategy providers, i.e. $VISR
1) @fusion_hodl made a great comparison of passive vs active LP strategy for ETH-USDT since v3 launch. These 3 weeks have been very generous for LPs in this pool. Huge market volatility resulted in a lot of fees and relatively low impermanent loss (IL).
2) Even ETH-USDT v2 with its huge TVL of $200-$300M offered a good earning opportunity in last 30 days. ETH went up, then down, and up again, coming back close to initial price. That's a perfect scenario for LPs. But life of LP is usually not that good...
apy.vision/#/pools/0x0d4a… Image
3) In a long term ETH-USDT pool suffers from a substantial IL (as long as number goes up) which is not offset by trading fees in v2 if you don't average your entry prices to the pool. In v3, without re-adjusting price ranges, it would be even worse...
4) Assuming v3 was live earlier and you provided liquidity for ETH-USDT on range 1000-2000$, when ETH went above 2000$, your pool would be left with USDT only. All your ETH would be sold to USDT. This is substantially higher IL than you would suffer in v2.
5) That's why re-adjusting price ranges on volatile pairs in v3 is a necessity. Without this you are not LP, you basically set up a range order to buy/sell some tokens and earn trading fees during its execution. Very cool but it's not LPing.
6) If you want to passively earn from LPing in a long period of time, e.g. a year, your price brackets will have to be substantially wider than +/- 20% to be in earning range 67% of time. For last 12 months an exemplary range would be about 250$-1850$.
7) Ignoring the fact that above 1850$ you wouldn't have any ETH left (ngmi), your wide range wouldn't really benefit from the biggest feature of v3, i.e. concentrated liquidity. The wider your range is, the more similar to v2 it becomes. So what's the point of LPing in v3 then?
8) I'm trying to make a point that the impressive outcome of 170% APR for passive LPing in last 30 days is too optimistic to use as a benchmark. We can't assume that ETH-USDT LPing in +/- 20% range will yield such high APR in a longer term.
9) This would only be true if ETH-USDT kept crabbing in the same range as last month. But as soon as it decides to go up or down, your passive LP strategy become obsolete and has to be adjusted. Otherwise, you won't earn anything (and be left with only one token from the pair).
10) Frequent adjustment of price ranges maximizes yield from your LP strategy. Wide range increases probability of capturing market price to collect trading fees. Tighter range earns more than wide range but is also more difficult to maintain and riskier.
11) @VisorFinance maximizes LP yield for you. So far it's been only 3x better than exemplary passive strategy of +/- 20% but in a longer term passive APR would only go down. Active LP strategies will always substantially outperform passive ones.
12) You could try to become a profitable active LP by keeping the range tight and adjusting it frequently. It does not only take a lot of time to monitor your position but it also costs a lot.
13) Each adjustment means you need to remove liquidity from current position and add liquidity to a new one. I calculated how much it costs depending on the network congestion when ETH = 2800$ (it becomes linearly more expensive when ETH price goes up). Image
14) To justify manual adjustments of price ranges, you need to maintain a reasonably sized position which earns substantially more than you pay in transaction fees and covers the opportunity cost of time you spend on this. You also need to have a strategy.
15) I mentioned it earlier and I will say it again:

Most individuals won't be able to compete with professional automated market making strategies on Uni v3. The great majority won't even want to try because of costs and complexity.

Bullish for $VISR.

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More from @korpi87

korpi Profile picture
24 May
1) During this market crash, all the prices dumped heavily. It didn't matter if it was a meme coin like $DOGE or $SHIB or capital asset like $SUSHI or $BNT. I hoped fundamentally strong projects would be more resilient to such violent movements. But maybe they still will be? Image
2) I've been very conservative during this bull market. I didn't buy any meme token and decided to stick to DeFi projects which generated revenues. I was ok with $DOGE, $SHIB and $SAFEMOON substantially outperforming my portfolio. I just wanted to play a safe long term game.
3) I focused on DeFi tokens because they are not "coins" like the majority of vapor projects from the previous cycle. They are more like capital assets - projects generate revenues and, therefore, tokens can be subject to traditional valuation metrics.
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korpi Profile picture
19 May
Today was a good opportunity to see if high volatility on the market, with stable coins losing their pegs, can impact leveraged farming of $MATIC rewards on $AAVE. Let's see what happened with my position. 🧵👇
The idea of leveraged farming consists in iterative lending and borrowing of the same asset. Using the same asset is supposed to protect the position from liquidation even if debt to collateral ratio (D/C) is very high and close to liquidation ratio.
I assumed earlier that liquidation of such position would not be possible even in case of oracle failure. Today stable coins substantially deviated from their 1$ peg. How did it impact my risky leveraged $USDC farm at 80% D/C (liquidation ratio at 85%)?
Read 6 tweets
korpi Profile picture
14 May
1) I've been liquidity provider (LP) on Uniswap v2 long enough to understand that it was never an easy passive yield. If you didn't actively counteract impermanent loss (IL), it would most likely eat all your profits from fees. How does v3 impact life of LPs? Let's explore.
2) V2 didn't offer LPs any options to manage their liquidity pools. Each LP participated in the same market making strategy (x*y=k). To counteract impact of IL, LPs could merely average their entry prices to the pool and try to time their exit correctly.
3) V3 changes this dramatically. Each LP owns a unique market making (MM) strategy by defining a price range on which they wish to provide liquidity to. This way LPs can easily express their opinions on market movements and compete with other LPs.
Read 26 tweets
korpi Profile picture
2 May
I have no idea what $TRU is but its daily Volume / Liquidity ratio on Uniswap is at 37, which means 11% daily profit for LPs just from trading fees. Apparently $TRU can be bought cheaper on a bonding curve outside of Uni and is arbed heavily on Uni leading to such a crazy volume.
At current V/L ratio, LPs are in profit unless $TRU outperforms $ETH more than 170% in a single day which equates to impermanent loss of 11%. Price is dictated by the bonding curve and I don't know its shape but judging by current price action I bet it's a very low probability.
So if you hold $TRU and want to earn extra money, use the current opportunity of low gas prices and add liquidity to Uniswap. I'd do it but I'm a bit afraid to ape into $TRU after such price increase without knowing what it is and I'm too tired to look into it now.
Read 4 tweets
korpi Profile picture
30 Apr
One month ago I tweeted about the emergence of strong $OHM community. Since then circ. MC more than doubled (3x at the top) but price has been almost steadily increasing and haven't yet stress-tested the (3,3) meme. Will $OHM stakers prove their diamond hands now?
Although Coingecko reports a massive 57% decrease in price in last 24 hours which could suggest a sudden exodus, it's not a correct figure. There were some issues with incorrect price feed from Sushi which apparently haven't yet been fully fixed.
The correct 24h price decrease atm is 37%. Still substantial enough to draw attention. Of course, price is expected to go down because circulating supply gets bigger and bigger every day but sudden movements are always moments of truth. Let's check some on-chain metrics for $OHM.
Read 5 tweets
korpi Profile picture
24 Apr
I wrote a short thread on $NXM / $WNXM yesterday, planned to post it today but $WNXM price increased substantially and it's not valid anymore. I'll post it anyhow because this opportunity periodically comes and goes so it makes sense to keep an eye on it.

The original thread👇
I've already mentioned it a few times but it's free money so I will do it again. You can keep full exposure to $ETH price and get at least 35% extra by buying $WNXM now at 0.028 ETH and selling it when it goes back to 0.038 ETH (minimum).
@NexusMutual is the unquestioned leader in the decentralized insurance and I will probably have to write a long thread about them (spoiler: I will prove how massively undervalued the project is) but today I just want to mention a couple of facts.
Read 6 tweets

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