TradFi tactics win on Uniswap v3 says BIS study
A study published by the Bank for International Settlements (BIS) claims that the most successful liquidity providers on Uniswap v3 are sophisticated institutional agents who mimic the tactics of traditional finance. Despite the promise of decentralized finance (DeFi) opening up lucrative opportunities to average Joes, the findings show that there’s no such thing as a free lunch. The BIS’ 36-page Working Paper compares “sophisticated and unsophisticated participants” across the top 250 pools, representing 96% of volume on the decentralized exchange (DEX); the groups are defined according to their “behavior and position sizes.” The “profitability, liquidity provision strategies and responses to market changes” of the two groups were then analyzed to explore “whether DEXs fulfill their promise of ‘democratizing’ financial markets by allowing anyone to participate in liquidity provision without intermediaries.” Rather than wide-range, passive liquidity provisio...