An Empirical Study of Market Inefficiencies in Uniswap and SushiSwap
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Author / Producer
Date
2023
Publication Type
Conference Paper
ETH Bibliography
yes
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Abstract
Decentralized exchanges are revolutionizing finance. With their ever-growing increase in popularity, a natural question that begs to be asked is: how efficient are these new markets?
We find that nearly 30% of analyzed trades are executed at an unfavorable rate. Additionally, we observe that, especially during the DeFi summer in 2020, price inaccuracies across the market plagued DEXes. Uniswap and SushiSwap, however, quickly adapt to their increased volumes. We see an increase in market efficiency with time during the observation period. Nonetheless, the DEXes still struggle to track the reference market when cryptocurrency prices are highly volatile. During such periods of high volatility, we observe the market becoming less efficient – manifested by an increased prevalence in cyclic arbitrage opportunities.
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Publication status
published
External links
Book title
Financial Cryptography and Data Security. FC 2022 International Workshops
Journal / series
Volume
13412
Pages / Article No.
238 - 249
Publisher
Springer
Event
2nd Workshop on Decentralized Finance (DeFi 2022)
Edition / version
Methods
Software
Geographic location
Date collected
Date created
Subject
blockchain; automated market makers; market efficiency
Organisational unit
03604 - Wattenhofer, Roger / Wattenhofer, Roger
Notes
Conference lecture held on May 6, 2022.