Liquidity Provider Insights with Zaki Manian (Special Edition) - Ep. 4

Launch App

Liquidity Provider Insights with Zaki Manian (Special Edition) - Ep. 4 - New Pairings Release

Great news for liquidity providers (LPs). The week after we launched Sommelier’s Parings app to automate how they work in Uniswap v3, we’ve made some cool feature improvements in User Interface design. Sommelier cofounder, Zaki Manian, shares some thoughts on what liquidity providers need to know about working in Uniswap v3 and explains a couple of helpful UI changes.

Pairings, Sommelier’s app to automate processes in Uniswap v3 -- Launched!

“As we launched we cleared up some confusion of seeing a view of multiple tokens -- trading at multiple fee tiers -- so we created a display of just the tier you are on as you search. For instance, UNI exists at 3% and UNI/ETH at 1% pools and our ordering is by volume so you have implicit information about which pair is favorable", Zaki Manian says.

He continues:

“LP’s generally want to be in the 3% pool,” he observes. “That was the Uniswap v2 feed and seems right. For Stable coins this new 5% fee range was created but in general for most pairs you’re going to see the 3% fee range for the non-stable coin pairs.

The other thing that was probably confusing in the first version that we released -- and if you’re not embarrassed about the first version you released too late -- it was hard to figure out what Bullish and Bearish meant. Because if I am in WETH UNI am I Bullish UNI? What does it mean? So you are bullish WETH, Bullish WETH in this view and you can click on this little arrow button and switch and see buttons for Bearish UNI, Bullish UNI, and our recommended bounds change.”

LPs will notice that ETH is checked on and the other tokens, UNI and WETH, are checked off. We switched to single-sided add being the default. If an LP has only ETH and doesn’t have UNI and WETH, Pairings will essentially swap the LP’s tokens into the correct pairs. The app will take care of that.”

What we’re seeing under Uniswap v3

Today, we’re continuing to see odd distributions of liquidity. Zaki observes:

“In a world where gas was free and everyone’s automated box and automated balancers were all mature, you would expect to see a much tighter distribution, or a much more spot-price-centric distribution. But what we continue to see in Uniswap v3 is liquidity lag volatility. That is definitely a theme of this era. It creates opportunities. For Sommelier we’re working on Cellars, which is the next product after Pairings to provide more automated rebalancing capability for those needs.

“And in general, across the pairs with the market action over the weekend, the reversian mean bias is good for liquidity providers. The Bollinger-bands-based mechanism that is underlying our market sentiment indicators is saying you want to provide liquidity around where the average price of the asset has been over the last 20 days. And, so we do this exponentially weighted calculation, look at the averages and look at how the averages have changed over time, and come up with a recommendation. And when you see the market retrace like it has last weekend, having your liquidity distributed over that mean range means that you are continuing to earn from these prosperous decisions. And it speaks to this being a good first initial approach for how many LPs are going to be able to work with Uniswap v3.”

Folks can continue to play with Uniswap v3 as if they were just in Uniswap v2. LPs can take a position today. If you have a strong opinion on UNI, WETH, or ETH you can express that opinion here and someone will set you in the appropriate range order for that particular pool.

Expect a steady cadence of releases from Sommelier in the coming weeks.