Friday 16 October 2020 12:33 pm

Technically speaking: a data analysis of Uniswap

The biggest crypto craze of the moment is decentralised finance, and the most popular decentralised exchange is Uniswap.

The Novum Insights analyst team has pulled together data on the most active of the 14652 trading pairs on Uniswap and it has been a rollercoaster ride as to where volume is. The sector has lured in much of the crypto world with prospects of huge returns, driven by individuals providing liquidity to the good, the bad and the ugly of the defi world.

One of the key elements of decentralised finance is that the users are able to earn fees for providing a market for particular tokens, removing the need for centralised counterparts.  

We thought it wise to consider where tokens are being provided ‘regular’ sufficient liquidity so that you will have ‘herd’ protection. The first thing to remember is the market is very one-sided – of the thousands of pairs only 500 have liquidity above. We looked back at the market when it was booming in September, as it drew increasing attention but also began to experience significant turbulence and controversy. 

In the month of September, there were an average daily liquidity of over $1BN on Uniswap and as expected, the ‘Core’ tokens (large, well established tokens like USDT, USDC, DAI, WBTC) make up the bulk of the liquidity. 

After the ‘core’ tokens where is the rest of the liquidity going?  Here is the chart with the core tokens removed.

The biggest ‘splash’ in the DEFI world was (so far) ‘SUSHISWAP’ a clone of UNISWAP protocol with added token (and menu?) masterminded by the anonymous ‘ChefNomi’ This project delivered a super-trendy website and exciting ‘tasty’ yields on the provision of liquidity.

So when SUSHI did ‘pop’ and the master Chef withdrew $14m in one go, the price of the SUSHI token plummeted and everyone rushed for the exit on UNISWAP to stop providing liquidity for $SUSHI. However, the frenzy succeeded in creating general interest and ‘contagion’ to other projects which saw huge peaks in their liquidity around the SUSHI craze – as per this graph from UNISWAP data – “Peak Sushi”.

This is an edited version of a post that first appeared on the Novum Insights blog. Please go there to look at some of the underlying data.

Crypto AM: Technically Speaking in association with Zumo Money