Quantitative investments in decentralized finance

This paper performs a comprehensive empirical investigation of liquidity provision into concentrated liquidity (Uniswap V3) pools on the Ethereum blockchain. To examine the performance of liquidity provision strategies and their determinants, we reverse-engineer each liquidity pool’s history and measure every liquidity position’s return. We also decompose each position’s return into components, including core elements—non-concentrated liquidity provision and liquidity concentration. Returns to the core components of liquidity provision are negative on average but are mildly positive within the sample of frequent liquidity providers. Some liquidity providers seem to possess skill, as evidenced by persistence in performance, by learning from past experience, and by associations between several position and liquidity provider characteristics on one hand and performance on the other hand. We compare quantitative and discretionary liquidity provision strategies and their performance and find that quant liquidity providers significantly underperform discretionary ones. This underperformance cannot be fully traded to measurable differences in strategies of the two types of liquidity providers. Successful quant liquidity providers employ strategies that are largely similar to those of successful discretionary liquidity providers.

V3 strategies Nov 23 2025.pdf

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