A boat in a container shipyard

DEX Brief No. 25

The current sentiment of LPs, what we've been building, and more.

Written by

The Shipyard Team

Published on

December 1, 2023

Top of Mind at Shipyard

  • We spoke with 40+ users to assess the current sentiment of LPs across the DeFi space. 
  • Firsthand experience of impermanent loss (via pools that don’t solve this issue) has left many deeply skeptical of LPing altogether. 
  • Additionally, current ETH staking yields are pretty attractive, so the risk-free rate is pulling liquidity away from LPing.
  • However, there’s still a strong willingness to dabble in experimenting with new protocols, creating an opportunity for protocols offering sustainable returns and honest LP performance metrics. 

At Shipyard, we periodically conduct user studies to gauge LP sentiment. This year, our 40+ conversations yielded some striking conclusions. 

In particular, it’s clear that LPs feel burned. Two years ago, during the height of DeFi summer, few investors understood impermanent loss. Now, almost everyone who would consider LPing has lost to IL and learned firsthand that headline APYs are a fallacy. This has bred a deep skepticism of LPing altogether (fool me once, and all that). Additionally, ETH staking yields are pretty attractive on their own now, so the risk-free rate is pulling liquidity away from LPing.

The exceptions to this are highly sophisticated LPs who are still optimistic but increasingly unsure that they can arb their way to outperformance by actively managing liquidity. These LPs are willing to try new protocols with substantial TVL (e.g., Maverick), but haven’t made up their minds yet on whether or not these strategies are sustainable.

Fortunately, there is still a strong willingness to experiment with new protocols in small amounts. This means that protocols offering sustainable returns and reporting clearly on LP performance still have a pathway to success. However, building around these new user needs will take time and only happen gradually. The smart money should increasingly focus on LP retention, using cohort analysis to see how new LPs scale up over time.

Finally, there is mild optimism on ETH performance over the next 6-12 months. LPs seemed cautiously optimistic but did not expect a sudden massive runup.

- Shipyard CEO, Mark Lurie

Below DEX

We’ve been building! 🛠️

Shipyard is helping build out the DeFi ecosystem for both retail users and other protocols. Recently, we’ve been focused on RFQ solutions for DEX aggregators, helping them route transactions more efficiently. The Shipyard team's edge in creating low-fee solutions for retail users has translated well into solving similar problems for larger trade orders. Our work on RFQ solutions underscores our commitment to creating DeFi tools that work for everyone, regardless of transaction size, and ensure less friction and a better user experience. 

Around DeFi

Team press: NFTs Are Retaining Value, Researchers Say

Community Updates

  • AdmiralDAO’s Operators (elected by the DAO in October) began executing their duties over the past month. This is a giant step for the DAO’s decentralized governance, empowering the community and its representatives to chart the future of Clipper. 

Written by

The Shipyard Team

Published on

December 1, 2023

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January 8, 2024

Shipyard LP Report results, 2024 outlook for derivatives DEXs, and more.

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