1/ Diving into Pool Depths and Composition of Liquidity on @THORChain. Two major trends stand out in data:
First, LPs are observant, and employ evolving LP strategies over time. They don't just dump funds and forget about it.
First, LPs are observant, and employ evolving LP strategies over time. They don't just dump funds and forget about it.
2/ Second, while BTC consistently draws a lot of liquidity on each cap raise, ETH and ERC-20s are falling behind over time.
This speaks to what LPs value on Thorchain.
This speaks to what LPs value on Thorchain.
3/ What's up my Thorchads and chadettes! Full Data Digest can be found here with graphs, tables and all that good stuff: alexsimpson96.medium.com/thorchain-data…
Here is a thread of the key points.
Here is a thread of the key points.
4/ Average pool on Thorchain has 256 unique LPs, with $44,787 average deposit.
Unsurprisingly, BTC and ETH see most widespread demand from LPs, with 1386 and 1141 unique LPs resp. Small average deposits of $21, 870 and $17, 665, suggests some of least whale dominated pools.
Unsurprisingly, BTC and ETH see most widespread demand from LPs, with 1386 and 1141 unique LPs resp. Small average deposits of $21, 870 and $17, 665, suggests some of least whale dominated pools.
5/ ERC-20 pools have vastly different liquidity composition.
$DODO, $ALCX among others have very few unique LPs, over $100,000 average deposit, suggesting heavily whale dominated.
To see why this happens, we need to understand the decision making of LPs.
$DODO, $ALCX among others have very few unique LPs, over $100,000 average deposit, suggesting heavily whale dominated.
To see why this happens, we need to understand the decision making of LPs.
6/ LPs are observant, and evolve their strategies over time.
For example, here we have net weekly liquidity changes for $USDT pool. Peaks are when caps raised.
Peaks getting consistently smaller. Amounts withdrawn in-between getting larger.
For example, here we have net weekly liquidity changes for $USDT pool. Peaks are when caps raised.
Peaks getting consistently smaller. Amounts withdrawn in-between getting larger.
7/ In week 2 cap raise, 141,856 $Rune added to USDT pool. By week 12, largest cap raise across all pools, only 62,675 Rune added.
Similarly, in week 3 (between cap raises), 0 net liquidity change. However, by week 10 was a net -17,852 Rune liquidity change.
Similarly, in week 3 (between cap raises), 0 net liquidity change. However, by week 10 was a net -17,852 Rune liquidity change.
8/ Two factors at play here.
Firstly, LPs are following earnings. USDT earnings are decreasing over time, with other stable coin pools e.g. BUSD rising in profitability due to arbitrage. Can find a full breakdown of fee earnings on THORChain here:
alexsimpson96.medium.com/thorchain-data…
Firstly, LPs are following earnings. USDT earnings are decreasing over time, with other stable coin pools e.g. BUSD rising in profitability due to arbitrage. Can find a full breakdown of fee earnings on THORChain here:
alexsimpson96.medium.com/thorchain-data…
9/ Secondly, the opportunity cost of pooling ERC-20 tokens on THORChain is high. These are some of the most productive assets in Defi, so in an environment of limited cap raises, LPs are choosing to pool other assets instead.
10/ Looking at all pools, we can see this play out.
Half way point for total liquidity pooled on THORChain was June 18th. Here is breakdown of net liquidity changes before and after 18th.
All things equal, should see same liquidity added before and after.
Half way point for total liquidity pooled on THORChain was June 18th. Here is breakdown of net liquidity changes before and after 18th.
All things equal, should see same liquidity added before and after.
11/ Deviations from this tell us how priorities of LPs are changing.
BTC and ETH remained consistent as most popular pools to add liquidity to. Only slight decline in net liquidity added of 10% and 12% resp.
BTC and ETH remained consistent as most popular pools to add liquidity to. Only slight decline in net liquidity added of 10% and 12% resp.
12/ BEP2 pools have become significantly more popular.
BUSD liquidity growth up 75%. BEP2 BTC and BEP2 ETH up over 100%.
By contrast, USDC, USDT, LTC, Bitcoin Cash, as well as many of the smaller ERC-20 pools all saw decreasing growth.
BUSD liquidity growth up 75%. BEP2 BTC and BEP2 ETH up over 100%.
By contrast, USDC, USDT, LTC, Bitcoin Cash, as well as many of the smaller ERC-20 pools all saw decreasing growth.
13/ Many ERC-20 pools e.g. $HOT, $SNX, see large initial spike of liquidity, but little change later on.
They see significant seed funding to get listed, but fail to capture additional liquidity from LPs.
Low fee revenues + high opportunity cost makes them unattractive to LPs.
They see significant seed funding to get listed, but fail to capture additional liquidity from LPs.
Low fee revenues + high opportunity cost makes them unattractive to LPs.
14/ Zooming in on final caps raise, can get our best glimpse of what most popular pools will be in a more mature THORChain ecosystem.
Total of 3,598,907 $RUNE was added on final caps raise. Breakdown is in pie chart.
Total of 3,598,907 $RUNE was added on final caps raise. Breakdown is in pie chart.
15/ Unsurprisingly, $XRUNE big winner due to IDO. While cannot expect similar 66% share of liquidity in further cap raises, @TehSlaw's tweets make me more bullish than ever on @thorstarter, so my feeling is will capture similar liquidity depth to BTC and ETH when ERC-20s restart.
16/ One big surprise is ETH fell from consistent number 2 spot in liquidity growth to 5th.
ETH overtaken by XRUNE, BEP2 BTC and BUSD.
By contrast, BTC untouched in number 1 spot.
This speaks to what LPs value on THORChain.
ETH overtaken by XRUNE, BEP2 BTC and BUSD.
By contrast, BTC untouched in number 1 spot.
This speaks to what LPs value on THORChain.
17/ High opportunity cost to pool ETH, so highly productive BEP2 pools eat into its liquidity.
BTC by contrast has tiny opportunity cost. One of the least productive assets in Defi, so 15%+ APY is immense value.
I expect BTC's important role on THORChain to stay untouched.
BTC by contrast has tiny opportunity cost. One of the least productive assets in Defi, so 15%+ APY is immense value.
I expect BTC's important role on THORChain to stay untouched.
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