Saturday, July 23, 2022

I have been tracking the estimated APR from the Loopring AMM liquidity pools for the last two months. Here are the results

Average AMM POOL APR (estimated)

The graph above shows the liquidity pools for

  • ETH/USDC
  • LRC/ETH
  • LRC/USDC
  • IMX/USDC
  • WBTC/ETH

You can visit the original source yourself at https://loopring.io/#/invest

I chose these pools because the first four had the most liquidity locked back in May. Also WBTC because it's Bitcoin.

Observations about the spikes

  • 2022-05-22 Many LRC holders are leaving Coinbase and other CEXs because of CEX uncertainty and risks
  • 2022-06-13 Liquidity Pool Rebalancing: See this post
  • 2022-07-11 GME NFT Marketplace Beta Release
  • 2022-07-19 Clueless about this spike. More activity from the NFT Marketplace? If you know more, please tell in the comments!

I calculated the median and average estimated APR for the whole timeframe:

  • Start: 2022-05-16
  • End: 2022-07-21
eth_usdc lrc_eth lrc_usdc imx_usdc wbtc_eth
MEDIAN 4.81% 5.87% 15.88% 10.31% 1.47%
AVERAGE 34.07% 6.80% 19.03% 11.75% 2.08%

Example: Read it like this: MEDIAN of the estimated APR from 2022-05-16 until - 2022-07-21 for eth_usdc is 4.81%.

Sorry about the crooked timeframe. It has nothing to do about the calculation but more about my own schedule to write a post.

Take-Aways

  • ETH-USDC has this crazy liquidity pool rebalancing event where for a short spooky but beautiful moment in time, you would get 5,760.57%.
  • LRC-ETH will most likely yield the least impermanent loss. With liquidity rewards and about the same performance of both coins, it might yield greater rewards than staking ETH (~4,2%) (https://ethereum.org/en/staking/) by itself.
  • LRC-USDC has the most consistent highest APR from any of the TOP 4 pools by liquidity. Because it's a stablecoin pair you must also consider impermanent loss more than with a non-stablecoin pair.
  • IMX-USDC actually has consistently high APR of 10,31% by median. If you like to own the whole GME crypto basket LRC+IMX, you can let the crypto part grow quite nicely in the LP.

What can be done better?

  • The "estimated APR" is calculated based on the 24h volume on Loopring's AMM swaps and orderbooks and shown in your Loopring app and the invest page[https://loopring.io/#/invest].
  • To get the true APR, the 24h volume and the collected swap fees must be considered to calculate the 24h APR. I think... I haven't fully dived into this one out so I would appreciate assistance.

A full APR calculation must also consider:

  • Impermanent Loss
  • different price fluctuations of the pairs
  • liquidity provider rewards ('official protocol')

What is the goal?

  • My goal is to make the AMM pools as a liquidity provider more approachable. I am a liquidity provider myself but I find it hard to grasp what the actual income is. Questions regarding the liquidity pools frequently appear in this sub.
  • Find the definitive answer whether LRC-ETH with estimated median APR of 5,87% is more preferable than staking ETH natively with ~4,2%. (https://ethereum.org/en/staking/)
    • the current estimated APR does not take impermanent loss and no LP rewards ('official protocol') so the above APR is just a preliminary result

What else do you want to know?

I am currently setting up a server for this project that let's you query the data dynamically including the other pools/volume/liquidity. What else would be interesting to find out or show about the data?


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