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Fluid’s flagship ETH-USDC pool has recorded greater than $8.5 million in cumulative losses since launch, in line with a Dune dashboard by Paradigm researcher Dan Robinson. The problem: a rebalancing mechanism that not solely underperformed throughout volatility, however seems to be systematically unprofitable, even exterior of rebalance home windows.
The pool, launched in December 2024, was designed to auto-rebalance liquidity as soon as ETH’s worth moved past ±10%. That design labored nicely in periods of modest volatility, however as ETH dropped from round $3,800 to $1,560 after which rebounded to $2,400, rebalancing dragged down liquidity supplier (LP) capital. CEX-DEX arbitrage alternatives swamped any buying and selling price revenue LPs obtained.
The markout knowledge paints a grim image. Because the chart reveals, LP PnL has been constantly damaging, not simply throughout rebalances. This contradicts the idea that price revenue from the concentrated liquidity AMM mannequin would offset rebalancing-related losses. As a substitute, it seems your complete design construction allowed MEV-extractive trades to bleed LP worth, even below regular circumstances.
For the reason that Could 11 governance publish detailing the issue, Fluid co-founder Samyak Jain has been enjoying protection.
As Sorella Labs CEO, who goes by @0xvanbeethoven, famous, LPs misplaced tens of millions in rebalancing-driven losses — successfully subsidizing arbitrage with no significant upside.
Critics argue the issue isn’t merely rebalance frequency, however the truth that arbitrageurs are in a position to constantly extract worth, whereas LPs are structurally deprived.
Fluid’s workforce has responded to the criticism, drawing parallels to the early days of Uniswap v3. Referencing an identical debate round utilizing markouts as a proxy for LP returns, they level to prior commentary from Uniswap researchers, corresponding to Xin Wan, who argued that short-interval markouts will be deceptive and don’t absolutely account for price accrual or LP lifecycle conduct.
The deliberate Fluid v2 improve — focused for June or July — will introduce dynamic charges, permissionless swimming pools, and customized LP ranges. It might additionally work out the LP points in different methods.
“There are a number of issues that may be added together with including them by way of hooks on v2,” chief working officer DMH instructed Blockworks. “I truly like [the] Angstrom answer however have to check it extra,” he added.
As proposed interim reduction, the Fluid workforce suggests distributing 500,000 FLUID tokens (0.5% of provide) over a yr to affected ETH-USDC LPs, plus $400,000/month in rewards till DEX v2 launches.
Somewhat than widening the rebalance band to cut back loss frequency, Fluid additionally proposes narrowing the vary from ±10% to ±7.5%, rising price accrual per unit of liquidity, though that may additionally improve rebalancing occasions and potential losses.
This short-term repair has raised eyebrows. “In case your pool is shedding cash on common, rising focus will improve each losses and variance,” wrote Dan Robinson. “So concentrating liquidity extra can be a double whammy.”
Even when DEX v2 offers LPs extra management, it assumes customers will have the ability to mannequin volatility threat and decide defensible ranges, a problem even protocol governance struggled to get proper in v1.
It’s to Fluid’s credit score that the workforce has acknowledged the difficulty publicly, citing their very own $1 million LP place as proof of pores and skin within the sport. In addition they emphasize that correlated pairs (like cbBTC–WBTC) have carried out nicely, and so the ETH-USDC pool’s struggles should not consultant of the broader DEX efficiency.
Nonetheless, the injury to LP belief is actual. Whether or not DEX v2 can reverse that dynamic would be the true check of Fluid’s unified structure.
For now, the ETH-USDC pool stands as a cautionary story: capital effectivity can reduce each methods, particularly when market volatility meets inflexible technique design.
