- Bancor and Topaze.blue carried out a study on impermanent losses in V3.
- A study found that half of those who provided liquidity to the protocol were losing money.
Investors and traders continue to pour money into Decentralized Finance (DeFi), which generates billions of dollars in trading fees revenue each year. According to a new study, half of them are losing money from a phenomenon called ‘Impermanent Loss’ on Uniswap V3.
Topaze.blue and Bancor help to study the effects of permanent loss on Uniswap V3. Bancor provides a safe and simple way to trade crypto, and also earn yield.
Topaze.blue is an advisory company that specializes in cryptocurrency and fintech. Their study reveals that half of the people who provide liquidity for the protocol are losing their money compared with holders.
Researchers attempted to determine if certain groups outperform other after finding that half the UniswapV3 liquidity providers failed to perform a basic buy-and-hold strategy. In detail, the study analyzed whether users who adjust their positions more often performed better than passive users who don’t.
In other words, it means that the study found analytical data that users who adjust their positions more often performed better than users who don’t. Thus, the findings question the generally held belief that ‘active’ LPs outperform ‘passive’ LPs in Uniswap V3.
Uniswap V3 has the highest trading fees. However, the impermanent loss in more than 80% pools analyzed overlooked its fee income.
Not to be forgotten, Uniswap pool analysis included $199 million trading fees and $260 million impermanent losses. It results in a net loss exceeding $60 million. This is also the reason why 49.5% of all LPs have negative returns.
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