Uniswap V3 Complete Guide and Tools for active liquidity provider
Uniswap v3 had launched on May 5, with L2 deployment on Optimism launched last week. Uniswap V3 has more feature that are helping out liquidity provider in earning their fees by introducing concentrated liquidity, multiple fees tier which making their liquidity more concentrated and maximize the capital efficiency.
However the problem is there is so many pool with different fees tier and so many activities occurred and makes small and medium liquidity provider hesitate to provide liquidity as there is risk of impermanent loss.
Here we together with Flipside Crypto had create some awesome tools and dashboard in helping out provider to determine and simulate on the pools they are going to provide next.
The dashboard is built on https://keklytic.com/uniswap. Notice the title of ‘active liquidity provider’, we built the dashboard for the latest stats with possibility of earns high fees in short time. DYOR before you decide in follow the guide.
The first chart show the most active pools in LP activities including adding or withdrawing liquidity. One can expect there is whale behind as each activities required quite some gas fees and is not something retailer can be afford of. Why there is sudden spike of LP activities? This is mostly due to the volume spike by certain pool and every whale are trying to provide liquidity to earn themselves some fees. Hence its a reference for providing the liquidity in earning some fast cash.
The next pie chart showing the ratio between adding vs withdrawing liquidity by providers. This can act as the market indicator for sentiment analysis. If ratio of adding is higher than withdrawing, its means the market might be bullish and users wanted to provide to earn fees. Conversely, if more users in withdrawing their liquidity, one can think its quite bearish as liquidity providers wanted to protect themselves against impermanent loss and withdraw their liquidity.
The next two chart are correlated to each others. The top 10 most volume token traded does not necessary be the top 10 most being swapped. How to interpret on both chart? Try and spot the token there is uncommon between both chart. If the token is showed on most volume and not on most being swapped, the token are traded by whales. On the other hand, if the token are showed on most being swapped and not on most volume, the token are traded frequently by retailers. This also act as reference for liquidity providers in decide which pool to provide on.
The next table showed the most recent fees collected in 24 hours timeframe and together with the pool liquidity and the fees to tvl ratio. We only display the top 10 pools. On the last table, we summarize the latest swap stats with most number of traders on certain pools.
After seeing all the reference pool in this dashboard, why not try to calculate the fees you can earned on these pools?
After users had some reference over the dashboard, one may come to the calculator and change the pool to the one in dashboard and try to input their capital and estimate their return. In the three bar on the left, try and simulate to whatever condition you like.
With this new tool, liquidity providers can better understand the fees they can expect to earn from Uniswap V3. We will guide you through this example. Lets say you notice the most active pool of MM-WETH spike up recently and are interested to see how much fees you could earned if you provided the liquidity. You will start with 10k capital. Next you want to provide liquidity to the current price range of 26MM per WETH. You try to narrow down the liquidity between 17 to 27 MM per WETH as you predict there might be some sell off coming. Notice the green area on the right (green area = range of liquidity you provided) .Here you left the swap data range be maximum as you trying to simulate the past 5 days of swap volume. Ta-da! Take a look at the box beside of your initial capital and you will get fees of next 24 hours and apy IF you provide a capital of 10k and in the range of selection just now. Take note that this calculator does not include impermanent loss and the calculated fees and apy is based on the past historical record. So the actual fees and apy might varies.
Now go on and do your own research! You may using both this tools and calculator to simulate your return!