Theory vs. Practice: A Deeper Look at ETH/USDC Liquidity Dynamics

Introduction

Providing liquidity across fee tiers

Optimizing returns across fee tiers

Ethereum mainnet vs. Polygon

  • The Polygon deployment is only 2 months old, compared with nearly a year for Uniswap V3 on mainnet;
  • The two chains plausibly have different userbases with different levels of wealth, behavioral tendencies, and preferences;
  • The data for Polygon is confounded not only by the recency of deployment but also by highly volatile market conditions post-launch;
  • Finally, the preexistence of Uniswap V3 liquidity pools on mainnet may crowd out liquidity provisioning which might otherwise have occurred on Polygon.

Conclusion

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