The State of Osmosis-October 28, 2022
Osmosis is in an enviable market position. It is the liquidity hub of the Cosmos Ecosystem, listing more tokens than any other DEX in this ecosystem. The reason for this success is user retention and volume, in which Osmosis is the clear leader.
As such, any movements seen throughout the Cosmos can be observed in one way or another by tracking liquidity changes within Osmosis.
Two of the biggest movements in the market over the last 3 months have come from Evmos and Stargaze. Each token has unrelated changes in price and liquidity, which exemplifies the beneficial position Osmosis is in.
If EVMOS sneezes…
Evmos holds a total of $4.7M of Osmosis’ Total Value Locked and over the last 2 weeks the token price has risen by over 40%. Changes in liquidity can be observed within Osmosis which help point to the magnitude of this move and what it means for liquidity providers.
Over the last 7 days the number of EVMOS on Osmosis adjusted from 2,215,429.06 to 2,011,439.556, representing a movement of about -9.21%. The reason for this? Buying volume of the token greatly surpassed selling volume during this time.
Take a look at this chart from Map of Zones which breaks down IBC activity over the last 30 days.
The bulk of transfers are occurring within Osmosis, which means a large portion of the activity can be identified by investigating the changes in liquidity and order fluctuations.
As you can see from the activity, buy action has largely outpaced the sell action. This is consistent with the days that saw the largest price spikes, which likely explains why the number of EVMOS tokens have dropped over the last 7 days.
Simply put, users are buying EVMOS tokens and taking them out of “circulation” in the liquidity pool.
These moves can prove beneficial for liquidity providers, who benefit from the increased volume in the form of swap fees.
The latest volatility yielded a total of $57,000.00 in swap fees for liquidity providers in the month of October, an acceleration over the prior month.
Liquidity Pool 722 is one of the most profitable pools for liquidity providers, not only in the swap fees generated relative to total TVL, but in the amount of incentive yield it generates. Liquidity providers are being compensated for their patience.
The Utility of STARS
An even more interesting case can be seen within the STARS token. In a similar turn of events, STARS has appreciated greatly in value over the last 3 months. However, the STARS token plays a significant role in how Stargaze operates.
Osmosis is responsible for over 90% of STARS liquidity, which means movements in price can be felt with a high degree of accuracy on Osmosis. This is confirmed by the continuous drop in liquidity we’ve seen over the last 3 months.
STARS token liquidity:
- 90 days -21.38%
- 30 days -12.93%
- 7 days -3.35%
You can view this drop in liquidity in the largest STARS pool.
Interestingly again, the activity is largely correlated with buys and sells seen on Osmosis. As more users have a demand for STARS to purchase NFTs, the liquidity will continue to drop as the yield is not high enough to offset this general market drive.
The main takeaway here is the central position in which Osmosis finds itself. In both of these events Osmosis held market share of liquidity across the Cosmos and in both events liquidity providers were able to capitalize on this position. This proves once again that Osmosis holds market share because of the need it fulfills for thousands of users every day.
Enter the laboratory at Osmosis.zone, the first decentralized exchange powered by the Cosmos SDK and IBC. See our published lab reports at the Osmosis blog, our bench notes at GitHub, and help plan future experiments in our Commonwealth
Connect with other DeFi Scientists by following us on Telegram, Twitter, Discord, Reddit, and the new Facebook and Instagram pages
Reach out to the Osmosis Ministry of Marketing by Email or Twitter and the Osmosis Support Lab by Email or Twitter
