Recent research has shown that the Uniswap v3 Protocol provides deeper liquidity on all the major cryptocurrencies like BTC and ETH than the top centralized exchanges.
The paradigm research concentrates on the rising role that automated market makers are beginning to have, gradually overtaking others by pushing the traditional order-book processes aside.
Paradigm’s research aims to make objectivity in data interpretation of phenomena possible and, as such, has allowed the open-source process to verify its claims. From the available data, the ETH/USD pair seems to offer double the liquidity that can be gotten from Binance and Coinbase combined.
Uniswap has Two Times more Liquidity than Major Exchanges
Further analysis of the Uniswap features on the ETH/BTC pair indicates that it offers 3x more liquidity than what is on offer on Binance and even more liquidity than the same pair on the popular centralized exchange Coinbase.
Additionally, some Ethereum pairs considered smaller are marked as mid-caps because they also offer considerably more liquidity in contrast to the major centralized exchanges.
The research further points out that besides the pair of Ethereum and Bitcoin, the liquidity from stablecoin is more than the one on Binance. Accordingly, Uniswap is reported to have 5.5 times more liquidity than even the biggest crypto exchange in the world. This has made it one of the most talked-about protocols currently making industry waves.
The Paradigm research concluded that users stand to gain more if they are to make a deal on the market using a decentralized platform because low liquidity means that traders will experience more slippage on crypto pairs with inferior liquidity.
Low Liquidity Impact
In furtherance of its drive to show how low liquidity can impact the gains accrued from transactions, Paradigm presents an example of a trader losing $24,000 in a trade worth $5 million on the ETH/USD pair, alongside marketing costs for both Uniswap and Coinbase.
This points to a scenario where traders would have to choose a platform between the centralized and decentralized ones to make meaningful returns on their investments. Paradigm also emphasized that the likelihood of making losses in centralized exchanges with low liquidity is higher than in decentralized ones with high liquidity.
While traditional markets are the dominant market forces, trading volume in the crypto industry has not attained the level reached by the existing business structure. By giving institutional-level liquidity to boost their progress, Paradigm strives to provide insights into the usefulness of utilizing AMMs to create new and emerging markets. The aim is to have more impact on promoting liquidity rates.
Meanwhile, Uniswap has scaled up its operations to the extent that any major shift in the market may have little impact on its market stability compared to how it has fared before. By implication, Uniswap is now at a stage where it can stand on par with some of the biggest industry players as it aims to make its network among the top 10 best-performing protocols in the industry.