The State of Osmosis-October 14, 2022
Efficiencies within Osmosis become more apparent as markets rock the patience of investors in both traditional and non traditional markets. This has resulted in interesting opportunities for those who look beyond the price action and more into the numbers.
Osmosis Liquidity is ever flowing, with changes occurring every week sometimes defying the market. This week I want to dig deeper into two of the biggest changes in TVL composition.
USDC as a percentage of Osmosis Pooled Liquidity had its largest decline since the inception of the Pool, in contrast the levels of Axelar token as a percentage of Osmosis liquidity continue to increase rapidly.
Building Bridges
Since their token listing on September 27th, Axelar has continued to grow faster than any other token listed on Osmosis compared to its ratio of TVL. As a result token liquidity within Osmosis is up 43.48% over the last 2 weeks.
This has defied the general trend of the crypto markets and Osmosis TVL as a whole. Since this time period Osmosis TVL has decreased 10.09%, and though TVL has declined over this time period, the volume on the Axelar / OSMO pool has outperformed Pools with larger TVL .
Here’s an example:
As a result of this high demand, Pool 812 ($4,087) has generated almost as much in fees over the last week than Pool 497($6,961) has with about $1.4M less liquidity.
You also may notice the high disparity in yields, which could be contributing to the higher volume, most of it which appears to be correlated to the increase in Liquidity of the Pool.
The volume of AXL tokens still largely point to a high demand for the Axelar token, and traders trying to capitalize on the yields being driven by demand of the token ( Swap fees) and the high APRs being generated in the Pool currently.
For contrast, let’s take a look at how saturated liquidity in Juno would appear.
This is not to say an increase in sell orders would be negatively impactful to Osmosis. The beauty of the DEX, is that whether traders should choose to buy or sell orders, this generates revenue at the protocol level, which benefits Liquidity Providers. The Axelar loan swap was clearly successful.
USDC Dips
One of the largest growth stories within Osmosis has been that of USDC as the dominant stable coin within Osmosis. This appears to have slowed temporarily.
Over the last week, a significant number of USDC tokens were unbonded and withdrawn from Pool.
How significant you ask?
As a result of this massive unbonding occurred on October 8th, about 12M was withdrawn from the USDC/ OSMO pool, causing a drop in the number of USDC tokens within Osmosis.
Here’s an overview of USDC liquidity:
- Over 7 days (-30.55%)
- Over 30 days(-34.69%)
- Over 90 days (16.18%)
The decrease was so large that it caused APR within the Liquidity Pool to spike back to 79%. Interestingly enough, the number of buys and sells on USDC does not reflect someone exiting in a manner conducive to a rushed exit.
As a matter of fact, there were two spikes in sell volume over the last 7 days, soon after to be overtaken by a larger number of buy orders vs. sell orders. Although liquidity is coming back slowly into Pool 678, more than likely as a result of the spike in APR; it will take some time to recover this amount of TVL.
As the market continues to show no signs of making a turn, Osmosis has been somewhat shielded by the gyrations occurring. This is plainly apparent over the last month. Although fees continue to come into Osmosis, they are in a downtrend, which is consistent with the lessened volume seen in the broader crypto markets.
Osmosis continues to bring in new features such as lending, borrowing, margin, and perpetuals. This may help with the loss in volume and significantly reduce the impact of TVL as a performance metric.
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