Ariah Klages-Mundt pfp
Ariah Klages-Mundt
@aklamun
How are @gyroscope's new Dynamic Pools doing? Here's ETH/USDC on Base measured by market making PnL (TVL-adjusted markouts). Noticeably the best performance for this pair at the pool level. And it serves passive LPs. Let's walk through what this means 👇 **Why markouts?** Markouts compare the execution prices LPs receive in a liquidity pool against the ‘true’ prices on CEXs. - Positive markouts means LPs are making a trading profit. - Negative markouts means LPs are leaking value to arbitrageurs.
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Ariah Klages-Mundt pfp
Ariah Klages-Mundt
@aklamun
**Other components to LP profitability** LPs can also earn a return from 'volatility harvesting' if prices mean revert / wiggle around for a period of time. You can think of this in a simple way as effectively buying low and selling high over time (if the pool can achieve this) *while* prices wiggle back and forth. If a pool captures volatility harvesting, it can add profitability on top of markouts. - A pool with positive markouts and volatility harvesting will do even better. - If a pool has large negative markouts, it will be very hard to overcome this even with volatility harvesting.
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