"uniswap LP getting rich through merciless arb"
fascinating new paper from and proving that in certain conditions LPs can outperform HODL 50/50 with near-0 fee and arb-only flow
a must read
research.paradigm.xyz/uniswaps-alche
Conversation
I have been a LP on a pool where one asset went down a lot and the other went up. Here are the results so far:
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The value of my two positions had I not been an LP on Uniswap, would have been lower, I made ~$470 more as an LP.
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If were correct about AMMs, this result should be impossible.
Instead, given enough time, I might not just outperform a buy and hold 50%-50%, but might end up owning more of each tokens even though prices went in opposite directions.
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false!
It depends on how much one went up, how much the other went down, and how large of LP fees you got in the middle
Ok. In which scenario will the following happen according to you:
Uni LP continuously bleeds value to arbitrageurs to the point where it was better to just hold 50-50 instead of becoming an LP?
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you start with 1 ETH and 600 USDC
after a year ETH is at $2400
if you LP, you end up with 0.5 ETH + 1200 USDC = $2400
if you hold 50/50 you end up with 1 ETH + 600 USDC = $3000
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