Uniswap Protocol v3 now offers better liquidity than biggest exchanges in the world
According to recent research on Paradigm, the Uniswap v3 protocol has provided greater liquidity on all major BTC and ETH pairs compared to major centralized exchanges.
The research mostly concentrates on the rising role of Automated Market Makers’ structure, which is slowly overtaking the space by pushing traditional order-book market making mechanisms away.
Paradigm’s research contained the open-source method for anyone wishing to verify the objectivity of data. As the data suggests, the ETH/USD pair on Uniswap offers twice as much liquidity as Binance and Coinbase.
As for the Ethereum-Bitcoin pair, Uniswap offered three times more liquidity compared to Binance and an even deeper offering compared to the same trading pair on centralized giant Coinbase.
Small, bespoke Ethereum pairs marked as “mid-caps” also offer significantly more liquidity than centralized exchanges.
The research also suggests that besides Ethereum and Bitcoin pairs, stablecoin liquidity on the protocol largely exceeds the liquidity on Binance. Reportedly, Uniswap has 5.5 times more liquidity than the biggest centralized cryptocurrency exchange in the world.
The article then concludes on the benefits for users who will do business in the market in a decentralized way. The main problem with low liquidity is the slippage traders used to experience on low liquidity pairs.
Paradigm presents an example in which the impact of low liquidity would bring a trader $24,000 in losses for a position worth $5 million on the Ethereum/USD pair, including fee expenses on Uniswap and Coinbase.
While traditional markets still dominate the trading industry, Paradigm provides insight into the effectiveness of MAs in lowering the barrier to creating new markets and providing them with institutional-grade liquidity.
