Question:

The Ethereum merge brought some uncertainty to DEFI markets. It got many market makers (MM) to remove liquidity from defi to lower their risk. After the merge, some have redeployed the liquidity, and some haven't. 

Analyze the behavior of Sushi MMs 2 weeks prior to and after the merge. How much capital did they withdraw? which pools/chains got affected the most? Have they redeployed back their capital? Can we say anything about their identity (Tokemak, etc)?

Merge and how it affected Sushi?

The transition of the Ethereum network to Proof of Stake (PoS) or its new consensus mechanism for verifying cryptocurrency transactions is called the Merge. In fact, the Proof of Stake algorithm will be replaced by the Proof of Work algorithm.

Sushiswap is a community-based decentralized exchange and automatic market operator that people can participate in its management through voting. Using this platform, people can add their tokens to liquidity pools (liquidity providers) and earn rewards in return. The platform allows anyone to provide liquidity and in return, these people are rewarded with tokens.

Now in this analysis, the impacts of merge on Sushi have been investigated based on the liquidity move on Sushi pools.

The exact time of Ethereum merge is September 15, 2022 and the liquidity flow of the pools before and after merge explored two weeks before and after this date.

Methodology:

The Flipside date has been utilized to execute this analysis.

• LP provide and removal have been investigated before and after merge for ==USD volume, number of users and number of transactions.
• Top liquidity pools with ==highest removal capital== identified and the ==users with the large capital withdrawal== determined.
• Explore to find the ==redeployed back== on this pools and estimate the ==identity of these top liquidity removers or providers.

Part 1: Stats before and after merge

Findings:

• The volume of provided liquidity on Sushi pools is high for post-merge period so far.
• The share of users and count of transactions for both periods are close together.
• Over 29 million USD provided or deposited on the merge date and its the highest volume.

Findings:

• Removal from liquidity pools is high for pre-merge period in USD volume.
• A day before the merge of Ethereum had the highest LP withdrawal with over 15 million USD by 26 unique LP removers.
• On September 15 and 20 the next large LP withdrawals happened, respectively.

Part 2: Pools and liquidity providers

Findings:

Its time to find out the pools have been affected by Ethereum merge.

• The USDC-WETH pool has the highest volume of USD among Sushi pools and over 13 million USD removed before merge by 19 unique LP removers and 108 transactions.
• The YFI-WETH pool has the second rank of capital removal before the merge with over 2.76 million USD.
• The USDC-WETH liquidity pool has the largest volume of capital inflow with over 43 million USD with 61 unique LP providers after Ethereum merge.
• About 612 unique users have been provided liquidity to SYN-WETH liquidity pool by 1165 transactions.

Findings:

• The ==0x60ca1f1f3abc9146cc7561d39c9ab1a7a279f83f== is the leading address for LP withdrawal before merge. As can be seen from the LP providers after merge, this address has been provided LP after merge more than withdrawn volume.
• Also, the ==0x49a2dcc237a65cc1f412ed47e0594602f6141936== has been removed its provided liquidity before merge. The volume of withdrawal is 2.723 million USD by 2 transactions. Also, this address has been provided liquidity near 6 million USD in post-merge period.
• LP providers usually removed their LP before merge and after merge and Stabilization of conditions they redeployed back their capital.

References and useful links:

• LP provide on Sushi
• Ethereum Merge
• **Used dashboard: **

Author:

Credited by MZG

Discord handle: m.zamani#0361

Twitter handle: @GargariZamani