Messari: In-depth interpretation of Uniswap’s market performance and progress in the first quarter

Written by Jerry Sun, Research Fellow at Messari

Compile: iambabywhale.eth

Blockchain research institution Messari released the Uniswap market report for the first quarter, and ForesightNews compiled the key content of the original text

Important content:

  • Total transaction volume and corresponding liquidity provider fees declined in Q1 2022 due to waning interest in cryptocurrencies and NFTs starting in Q4 2021.
  • As the latest blockchain supported by Uniswap V3, the transaction volume on Polygon has become Uniswap V3’s largest market outside of Ethereum; additional liquidity mining incentives in the next quarter should continue to help drive continued growth increase.
  • The community is exploring further extensions to Celo and Gnosis.
  • The Uniswap Grants program sent out the largest wave of grants in its history in Round 6, which includes Grants proposals starting in late 2021.




macro level




Overall, Uniswap trading volume in the first quarter of 2022 was down 53.5% from the previous quarter. This echoes the global crypto market reaching a peak market cap of $3 trillion in the fourth quarter of 2021 and has since fallen back to $2 trillion. When the price of a token rises, trading volume generally increases with interest from retail traders; when the price of a token falls, retail investors lose interest. Unlike the NFT recovery in Q4 2021 and the all-time highs in Bitcoin and Ethereum prices, Q1 2022 saw much quieter trading activity.




Overall market liquidity declined in the first quarter of 2022, but to a lesser extent than trading volume. Uniswap V2 was the only network to experience a drop in liquidity during the quarter, down 25.7%, while all other networks saw small nominal increases. The drop in V2 liquidity does coincide with a drop in retail trading volume as V2 contains more long-tail token pairs. At the same time, market liquidity has grown significantly in Uniswap’s so-called scaling solutions, especially Polygon. Compared to the end of Q4 when it was just launched, liquidity on Polygon was up nearly 81.7%, with Arbitrum and Optimism also up 72.9% and 34.7%, respectively.




Polygon’s liquidity growth was particularly impressive given the lack of liquidity mining incentives for users in the first quarter. For context, when the original governance proposal was made, the Polygon team set aside up to $15 million for liquidity mining, with an additional $5 million set aside to support the ecosystem. As of the first week of April, these incentives are now live. Only time will tell how much of a boost it will give Polygon’s existing success.




After rising 54.0% in Q4 2021, daily LP fees fell 36.2% in Q1 2022, resulting in a final quarter-end figure similar to the end of Q3 2021. The Crypto anomaly in the fourth quarter of 2021 and the popularity of NFTs in the mainstream are associated with new highs for Bitcoin and Ethereum. Among non-Ethereum chains, Arbitrum and Polygon have brought huge gains, while Optimism has fallen behind. This data shows that more blue-chip token pairs are traded on Polygon (and therefore have lower fees), while the more popular pairs on Arbitrum have higher fees.




The total number of traded markets also continued to climb from the previous quarter for all trading pairs from Uniswap V2 on Ethereum to Uniswap on every non-Ethereum network. Uniswap V2 continues to account for the vast majority of the overall market. Uniswap V3 on Ethereum and Polygon accounted for 11% of the active market, while Optimism and Arbitrum remained negligible. Like market liquidity, Polygon saw the fastest growth in the first quarter, up nearly 300% from the previous quarter. Given all the data, it’s clear that Uniswap has found a “new home” on Polygon.




micro level


The four most active markets in Q1 2022 were USDC/WETH, USDT/WETH, SAITAMA/WETH, and FXS/FRAX. Among them, the editor believes that the more important data is the relationship between the income of providing liquidity and the impermanent loss.


Messari distinguishes three cases when measuring LP returns, assuming that users provide liquidity for 30 days, 90 days and 180 days, respectively, the return on the day of withdrawal of liquidity minus the impermanence of token value compared to before liquidity is provided The loss is the LP’s return.




Taking the USDC/WETH market as an example, in the past 365 days, users who provided 180-day liquidity had a negative rate of return when withdrawing liquidity in 52 of them, while the number for users who provided 30-day liquidity was 45 , providing 90-day liquidity is only 12. In the first quarter of 2022, only users with 30-day liquidity will lose money when they withdraw liquidity from January 22 to 27 and March 5, and LP positions will be profitable in all other cases.






For SAITAMA/WETH and FXS/FRAX, the two trading pairs are not optimistic. The data shows that although these two trading pairs are at the forefront of the trading volume, their liquidity providers are in a state of loss for most of the time. FXS/FRAX even just achieved the breakeven of some LP positions in the first quarter. liquidity providers have been losing money.


As for Uniswap V3, the most active trading pairs are USDC/WETH, USDC/USDT and WBTC/WETH. The three contributed 61% of the V3 market trading volume, respectively reflecting Ethereum as the cornerstone of the smart contract network, the stablecoin market and the The relationship between the two top cryptocurrencies by market cap Three market movements.


For the USDC/WETH trading pair, Uniswap V3 has a yield of 12%, which is 3 times the yield of the same trading pair in V2. For the USDC/USDT trading pair, there has been a considerable increase in trading volume for the pair after the implementation of a 0.01% trading fee. In the first quarter of 2022, the trading volume of USDC/USDT trading pair increased by 60% month-on-month, and increased by 114.1% compared with the third quarter of 2021, and more than doubled in 9 months. 87.3% of the total trading volume came from 0.01 % fee for liquidity pools. Meanwhile, liquidity grew by only 11.2%.




Before the transaction fee dropped to 0.01%, USDC/USDT trading volume on Uniswap V2 and V3 accounted for 30% to 33% of the combined trading volume on Uniswap and Curve. After transaction fees fell to 0.01%, the median ratio hit 48.3%, almost on par with Curve. Given the capital efficiency, Messari said, Uniswap now appears to be more competitive than Curve.


For the WBTC/WETH trading pair, the 0.05% transaction fee liquidity pool saw a 28.9% drop in volume but increased liquidity by 57.3%, and the 0.3% transaction fee liquidity pool saw almost flat volume but only increased liquidity 13.7%. This suggests that as the market cools, investors may choose LP positions such as Bitcoin and Ethereum that can generate consistent returns, and reassess market conditions when better opportunities arise.


Uniswap Grant Program


Uniswap released the sixth and seventh rounds of Grant plans in the first quarter of 2022, of which the funding provided by the sixth round of Grant reached $2.4 million, an increase of more than 2.5 times compared to the previous maximum of $946,000. Notable projects include off-chain governance project Other Internet ($1 million), Uniswap community analysis program Unigrants ($250,000), e-sports team Team Secret (attracting gaming audiences, $112,500), Art Basel (established Cryptocurrency booth, $68,500).


governance update


Governance proposals for Q1 2022, additional grants for Voltz to use Uniswap V3 and Uniswap deployment on Celo and Gnosis passed, but Uniswap V3 deployment on Harmony and distribution of protocol revenue to UNI tokens The holder’s proposal was rejected by the community.




The main focus of Uniswap in the first quarter of 2022 includes the growth of Polygon, the exploration of multi-chain layout, and the decline of the overall transaction volume of the crypto market. The question is, if trading activity decreases, will that be bad for Uniswap?

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