2022 Annual Fund Review of Uniswap V3-Part 1
2022年V3基金在熊市中表现如何？我们跟踪了6只基金和10个EOA地址，并使用Demeter进行分析。结果显示大多数基金在回报率方面表现不佳。更多细节请浏览我们文章。
Introduction
The price of ETH at the beginning of 2022 will be around $3,800. Except for a brief rally in April, ETH prices have trended lower throughout the year. The bear market produced significant losses on Uniswap V3’s liquidity positions through massive impermanent loss. A large number of asset management products emerge on the market in 2022 to help users manage liquidity positions. But what exactly are these asset management platforms doing, and what are their returns?
This article analyzes the behavior and returns of the popular Uniswap V3 asset management product, also known as funds, to show the real situation of the liquid position market. Funds include Gamma Strategy, Arrakis Finance, Popsicle Finance, Unipilot, dHEDGE, and Polycat*. Finally we try to characterize the strategies of funds that perform well.
You can view our code and data on Github. We welcome discussion. Feel free to contact: zelos@antalpha.com[1] or make an issue in our git.
Stay tuned to Zelos, and we will continue tracking Defi products’ returns in 2023.
Data Source
The data source is matic-univ3-eth-usdc-005 from the creation date of the pool (2021/12/21) to the last day of the year 2022 (2022/12/31), and all event logs from the creation date to 12.31.2022 are selected. Based on the active liquidity, we filtered out 6 fund addresses and 10 EOA addresses that are hosted using smart contracts.
• Polycat is inferred from the contract name and has no public entrance.
We will present the detailed data cleaning and research replication methods in the subsequent Part 2.
Code Reference：https://github.com/zelos-alpha/research/tree/master/task_uniswap_matic_funds
Funds Performance
In this paper, we consider the overall returns of the funds. Individual investors should also consider the performance fee charged. Among the funds we surveyed, Gamma and Popsicle take 20% of the performance fee. Unipilot charges 10% on Polygon and 20% on Ethereum.
From the fund descriptions, Gamma, Popsicle, Unipilot and dHEDGE (Toros) automatically manage the price ranges and rebalance assets. Gamma, Unipilot and dHEDGE (Toros) mention that they re-invest earned fees to achieve fees compounding. Arrikis’ trustless vault does not have a detailed description of their strategy. Each fund link is attached to the Appendix.
Financial Indicators
We used simply holding ETH as a comparison benchmark. 2022 ETH volatility is: 73%, and annualized return is: -67.55%. Using Demeter, we replayed the strategies of each fund and calculated the return metrics. Using the ETH net value on the fund start date, we plotted the fund net value trend.
It is worth noting that the funds run for different periods. Different time zone can have some impact on the metrics. For example, funds that avoided the sharp drop in ETH in May 2022 had a better market environment and an advantage in terms of returns.
Period return is the return of the fund during the actual active time. Combined with the number of days the fund is involved, we calculate the fund’s annualized return. Except for Gamma, all funds outperformed simply holding Ether. And Polycat has a remarkable performance.
Beta coefficient measures the sensitivity of asset returns to ETH. In a bear market, the lower the beta, the better the performance. In addition to Polycat, six funds strongly correlate with ETH, and Arrikis’ returns correlate most with ETH movements.
Alpha represents the difference between the actual return at risk and the average expected return at risk and measures the unsystematic risk of an investment. The higher the alpha coefficient, the better the fund manager is. Polycat performed well. Also noteworthy is Arrikis, which has better operational management capabilities compared to other funds with large beta.
Finally, volatility represents the uncertainty of the returns provided by the fund. The fluctuation of Arrikis Gamma is very close to that of ETH.
Operation Indicators
To analyze the actual strategy of the fund, we analyzed EVENT data. The chart below plots the fund’s Position on the ETH price. The gray line represents the 10% up and down of the ETH price. We also plotted the hourly volatility of ETH and the fund’s liquidity on the graph.
Arrikis has only five positions for the year. Except for May, when it faced a significant drop in ETH, Arrikis rarely moved its work. At the same time, Arrikis has a very high price upper bound and a sizeable market-making range, making the capital utilization low.
Gamma transfers its positions frequently, but the rate of moving flat positions does not correlate significantly with ETH volatility. Gamma has two different positions at the exact moment. Its market-making range is extensive, and its capital utilization is very low. Many positions are not adjusted in time after the ETH price has crossed the border, exposing the fund to high unearned losses. (See Appendix for the full market-making range of Gamma positions)
dHEDGE has the same problem of excessive market-making range. dHEDGE transfers ensure that the ETH price does not cross the border, but we don’t see an apparent active strategy in its frequent adjustment.
Popsicle and Unipilot have a smaller market making scope and higher capital utilization. Compared to the first three funds, Popsicle and Unipilot have higher returns.
Polycat has outstanding features. It does short term trading with a small price range set. The blue line on the chart is the ETH trend, and the red dots represent Polycat’s participation in the market. It is clear that Polycat’s strategy is not to earn commission revenue but to make grid trades.
The operation of the ten large addresses is as follows：
These three addresses: a1, a5,a7, all gained more than 40% excess return. a7 even had more than 200% excess return. It is also the only address that receives a positive annualized return on earnings.
a3, a6, and a8 all achieved positive excess returns.
Conclusion
ETH continues to move lower in 2022, with an annual return of -67.55%. Providing ETH-USDC liquidity returns through the fund outperforms holding ETH alone slightly in the bear market. However, the funds performance was not satisfactory.
Arrikis, Gamma, and dHEDGE have too extensive a range of market making, resulting in low capital utilization. All funds suffer from untimely position adjustments, which results in missing fee income and large impermanent losses. Popsicle and Unipilot had relatively reasonable position settings and adjustments, and they also had better excess returns. Polycat used a completely different short-term trading strategy and had sizable positive returns. Overall, fund strategies with high yields have the following characteristics: Smaller market-making range improves capital utilization. Timely transfer of positions.
Disclaimer
This is a working paper representing research in progress. The report is the production of a professional study, and its contents are intended to be informational only. This article is not and should not be considered as providing investment advice. No representation or warranty is made herein regarding the information’s fairness, accuracy, reasonableness, or completeness.
Appendix
Funds Information
Arrikis has three different Vaults. Two that are actively managed by managers. The one running on the page is Automated Trustless Vaults, which is managed automatically by the contract code.
Docs: Vaults[2].
Interface: Arrakis Finance — Web3’s Liquidity Layer[3]
Gamma Strategy contracts automatically manage the price ranges, rebalance assets, and re-invest earned fees. The products in this paper use dynamic strategy based on the volatility. The strategy simultaneously establishes two positions with different market making ranges. Gamma charges a performance fee of 20% on the fee earnings.
Docs: Strategies — Gamma[4].
Interface: Gamma — Provide Active Liquidity[5]
Popsicle Finance product is Sorbetto Fragola. The vault automatically managed by code. The product will rebalance and transfer positions. Again, Popsicle charges a 20% fee earnings.
Unipilot contract do fee reinvestment and rebalance. For each trading pool, Unipilot gives three market making range options: narrow, balance and wide. This paper analyzes the narrow strategy, which has the highest TVL. Unipilot charges a portion of its fee income(10% on Polygon and 20% on Ethereum.)
dHEDGE: Toros Finance is an automated strategies protocol build on dHEDGE. Toros manages liquidity, performs rebalance and reinvests fee income.
Plot
β
The beta measures the sensitivity of an asset’s return to market movements. It represents the systematic risk of the asset. To simplify the calculation, ETH is chosen as the broad market for this report.
α
Fluctuation
引用链接
[1] zelos@antalpha.com: mailto:zelos@antalpha.com[2] Vaults: https://resources.arrakis.fi/arrakis-v2-protocol/vaults[3] Arrakis Finance — Web3’s Liquidity Layer: https://beta.arrakis.finance/vaults/137/0xA173340f1E942c2845bcBCe8EBD411022E18EB13[4] Strategies — Gamma: https://docs.gamma.xyz/gamma/features/strategies[5] Gamma — Provide Active Liquidity: https://app.gamma.xyz/vault-detail/USDC-WETH-500[6] Sorbetto — Popsicle Finance: https://docs.popsicle.finance/our-products/sorbetto[7] Popsicle Finance: https://popsicle.finance/stand/optimizer-v3/1[8] Unipilot Vaults — Unipilot V2 (gitbook.io): https://unipilot.gitbook.io/unipilot-v2/the-pilot-protocol/unipilot-vaults[9] Unipilot | Earn Higher Returns: https://app.unipilot.io/stats[10] Ethereum Managed Liquidity — Toros Finance: https://docs.toros.finance/dynamic-vaults/ethereum-managed-liquidity[11] ETH Managed Liquidity | mlETH | dHEDGE: https://app.dhedge.org/pool/0x7454655ac21b78c0a4b68f906ba1ae4463410d65