On-chain Trading Opportunity Analysis

Executive Summary

On-chain trading has become a popular trend in the cryptocurrency industry. The rise of decentralized exchanges (DEXs) has provided traders with a new way to participate in the market. In this report, we aim to explore an on-chain trading opportunity by analyzing the data of the Uniswap trading pair, ARB/USDC, on the Arbitrum network.

Introduction

In the future of DEX trading, it is worth exploring the trading volume comparison between DEX and CEX.

1. The trading volume for the Arbitrum airdrop on March 23rd and 24th was $1.21 billion and $1.28 billion, respectively.[1]
2. DEX trading volume is expected to remain stable at 10-14% of total trading volume in 2022.[2]
3. With the optimization of on-chain high-frequency trading infrastructure, non-constant function market maker (CFMM) models such as hybrid and orderbook DEX are expected to account for 14-25% of trading volume from 2022.[3]

These trends suggest potential opportunities for growth in the DEX market and highlight the importance of optimizing on-chain infrastructure for more efficient and effective trading.

Data Analysis:

In this part, we will analyze the trading data of the ARB/USDC trading pair on Uniswap on the Arbitrum network and analyse a market maker strategy.

We collected the LP value PnL data of the ARB/USDC trading pair on Uniswap on the Arbitrum network from the Revert.Finance. The data covers the period from March 23, 2022, to March 24, 2022.

Historical Price Data

The price high volatility includes three time periods:

1. 21:00-22:15, where the opening price dropped from $10 to $1.0872 with mostly selling pressure and little buying pressure.
2. 22:15-23:00, where the price saw three consecutive bullish candlesticks with strong buying pressure, pushing the price from $1.08 to $1.48.
3. After the listing on Binance at 23:00, the price ranged between $1.2 and $1.4.

The Uniswap v3 pool fee collected shown in 3 days: