As usual with stablecoin pairs, most LPs in the DAI/USDC pools choose the 0.01% and 0.05% fee levels. This is because the volatility of these assets is inherently low and most market participants try to trade as close to a 1:1 ratio as possible and expect to pay lower fees.
DAI/USDC and USDC/USDT “Lower Fee” = 0.01%
DAI/USDC and USDC/USDT “Higher Fee” = 0.05%
There is approximately $171.2 million in total liquidity tied up in both mining pools, with the majority of that – 36.6% ($62.52 million) – being in the higher fee tier. The remaining 63.6% of this liquidity ($108.7 million) is in the lower fee tier.
These funds are provided by approximately 770 individual LPs in the two DAI/USDC pools. 43.9% of wallets only provide liquidity to the pool with lower fees. 52.2% of wallets provide liquidity to the pool with higher fees. The remaining 3.9% of wallets (82) are LPing to both pools.
A quick analysis of the 3.5% of wallets providing liquidity to both pools does not suggest an intentional and sophisticated strategy to maximize fee rewards. A significant number of these wallets do not consciously choose to switch between pools, instead providing liquidity via an automated service that redistributes their liquidity behind the scenes.
Stable takeaways
The split of USDC/DAI liquidity across both fee pools reflects the mindset of large vs. small LPs. Within the lower fee pool (0.01%) we see fewer LPs though higher average wallet liquidity. The higher fee, higher risk pool reflects the mindset of smaller LPs. These LPs accept a higher risk profile to offset their smaller average positions with the higher fee pool (0.05%).
Conversely, since stable pool fees are lower, large LPs can easily earn a lower fee percentage for less risk in their position, allowing their large LP positions to still generate a significant return without the pressure of actively managing their position. To confirm these conclusions, we also observed the USDC/USDT token pair with the same fee rates: 0.01% and 0.05%. Our conclusions have been confirmed and the behavior of the LPs in the USDC/USDT pool is consistent with the behavior of the LPs in the DAI/USDC pool.
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