50% of Users Providing Liquidity on Uniswap V3 Suffer Losses

Reading Time: < 1 minute

According to an analysis conducted by Bancor and advisory company Topaze.blue, about half of users providing liquidity to Uniswap V3 are losing money when compared to hodling.

In particular, the study, which has analysed the data from 17,000+ wallets providing liquidity in Uniswap V3, has revealed that almost half of users are suffering negative returns on their staked capital as a result of impermanent loss.

In spite of the fact that Uniswap V3 generates the highest trading fees of any DeFi protocol, the impermanent loss has completely wiped out fee income in more than 80% of the pools which have been subject to the analysis.

A total of 17 pools accounting for 43% of Uniswap V3’s total value locked) have been analysed in the study. Pools were chosen by size, meaning that pools with less than $10M TVL were excluded), data availability and token composition (like-kind and stable-to-stable pools like renBTC/WBTC and USDC/DAI were excluded).

We should take into account that the pools incurred more than $260 million in impermanent loss, leaving 49.5% of LPs with negative returns. However, in some cases the losses amounted to almost 55-70%, including MATIC/ETH (51%), COMP/ETH (59%), USDC/ETH (62%), COMP/ETH (59%) and MKR/ETH (74%).

In addition, it is worth mentioning there is no statistical evidence users who adjust their positions more frequently performed better than users who don’t.