Sushi Activity on Ethereum
Q96. How did the recent spike in market volatility affect the overall activity of sushi on Ethereum? Analyze both swaps and lendings?
Introduction
June 16, 2022. Was it a pleasant morning ?. Well far from it. There was blood on the street. Everyone invested in crypto currency around the world woke up to a red chart. A chart that showed every crypocurrency in red. Well except for the stable coins ( That doesn't include UST, my condolences to people who had it, Including me :) ).
You ask me What happened on that day?.
Here's the answer. On June 15, 2022 US Federal Reserve agency raised the interest rate by 75 bps. One of the highest since a few decades. The decision comes in the backdrop of consumer price inflation hitting 8.6 percent in May, the highest since 1981, as energy and food costs surged.
This increase on interest rate made people on the fridges of risk/gain of crypto currency to lean towards traditional banks that provided much safer returns (although low, it's among the safest). However this alone does not justify the market reaction. People did expect the fed to raise interest rate, but by 0.75 bps. HOLY ! that wasn't expected. along with indications of raising it further led to volatility in the crypto market.
If you would like to read more about it. You could do it here
Now that we have caught up with the incidents leading up to the market volatility and the basics of sushiswap, we'll start with the article.
Objective
Our main aim for this article is to analyze How the recent spike in market volatility affect the overall activity of sushi on Ethereum? Analyze both swaps and lendings?
Methodology
Source
This article requires the use of multiple tables. and hence we shall describe some of the use cases.
- To identify the price of a token, the ethereum.core.fact_hourly_token_prices table was used. BTC, ETH, Uni and Sushi were the symbols.
- To identify the TVL of pool, we use the ethereum.erc20_balances table. NOTE: The sql squery for TVL is taken from taghi's dashboard
- Transaction related to lending are identified using ethereum.sushi.ez_lending tables
- Transaction related to borrowing are identified using ethereum.sushi.ez_borrow tables
- The function calls for liquidations are ('0x76ee101b','0x415c0ca1','0xde5fb013','0xe4598d15')
- Swaps transactions are taken from ethereum.sushi.ez_swaps tables.
Brief of sections
Alright, so before we dive into the analysis. I'll give a brief structure of the analysis and what we can expect.
- Price comparison
- Comparison between BTC and ETH
- Comparison between ETH,UNI and SUSHI
- Trend of DEX TVL and comparison with uniswap
- Lending
- Breakup of amount lent
- Breakup of lending type
- Top coins lent and their trend
- Borrow
- Breakup of amount borrowed
- Breakup of borrow type
- Top coins borrowed and their trend
- Swapped
- Top pools used
- Traded volume comparison
Note: All analysis are related to the last month. That is, since June 1 2022 to July 1 2022 unless explicitly stated.
analysis
LFG (Let's freaking go) to analysis. We start of with taking a look at the price comparison.
Price comparison
Comparison between BTC and ETH
Bitcoin (BTC) is the largest crypto currency out there and is amongst the most well known. It's almost like a poster child of crypto currenct. So,We compare ETH with BTC to confirm if the slump in ETH was due to the reaction of the entire market. Or if the slump was related to any incidents related to ETH alone.
According to the graph, we can clearly see that both BTC and ETH follow the same path. This confirms our hypothesis that the slump in ETH prices was because of the overall market reaction to the FED policy update and rather not for ETH alone.
Comparison of ETH,UNI and SUSHI price.
Comparing the price of SUSHI and the chain coin ETH.
Note: UNI price has been modified by dividing by 4 to fit it into the graph while the trend is visible
Points to observe -
- The trend of sushi price, UNI and ETH are very closely related. It can be seen that it's during the 14-19 June that we see the lowest price.
- SUSHI and UNI, both are among the leading DEXs deployed on ethereum chain. Both can be seen to have the trend leading to JUNE 15. However, Uni appears to be recovering sooner than sushi.
- The slump in ETH has caused many of its underlying assets to also slump.
Trend of DEX TVL and comparison with uniswap
TVL can be defined as the total value locked in a contract. or in other words, the total balance of the contract at any given time. We now look at the TVL of sushiswap protocol and uniswap protocol and we aim to identify if their is a trend and we also look at how did the users react to the volatility, Did they add more into DEX or did they remove ?
NOTE:
- The sql squery for TVL is taken from taghi's dashboard
- UNI price has been modified by dividing by 4 to fit it into the graph while the trend is visible
It appears that both of the exhibit the decreasing trend. This clearly indicates the market volatility made the users to remove their funds from the protocols, either to convert them into fiat or for other reasons.
Lending
Break-up of amount
The lending contract is used when a user wants to deposit his funds into the pool ( he receives LP tokens in return) and when a user withdraw funds (the funds he had deposited earlier) from the pool ( in exchange for burning his LP token).
Hovering around the dates of June 15, we can see that post 14th of June the withdrawls (ie, people withdrawing what they had deposited) peaked 37K $ and the deposits plunged to meagre 200 $.
Liquidations.
The price plummeted on June 14. So did the price of underlying assets. So did this result in any position being liquidated ? We now have a look at it.
Just for this section, we consider a time frame of 1 year. We notice that lending order have been liquidated only in the month of November 2022, that is during the last bull run. So we can clearly say that this market volatility did not result in any lending contracts getting liquidated.
If people were withdrawing, what were they withdrawing. To answer this question, we look at the next graph
Top coins lent and their trend
We now look at the top coins that interacted with the lending contracts. That is either they were withdrawn from the pool or they were deposited into the pool. But only as lending feature.
Needless to say the top 4 are all stablecoins. ALL OF THEM.
While DAI and FEI arealgorithmic stable coin, USDC and TUSD are both fully collateralised. This suggests that users look towards stablecoin during uncertainty.
Borrowing
Break-up of amount
The borrow contract is used when a user wants to borrow funds into the pool ( he instead deposits his coins or assets as collateral) and when a user repays the borrowed funds (the funds he had borrowed earlier) to the pool ( in exchange for receiving his original assets back).
Hovering around the dates of June 19, we can see that post 15th of June the Borrow (ie, people taking funds from the pool) peaked to 4K $ and the deposits plunged to meagre 2000 $. This may be because of the bad actors who might have purposely taken out stable coin through bad loans.
Liquidations
The price plummeted on June 14. So did the price of underlying assets. So did this result in any position being liquidated ? We now have a look at it.
The liquidations occur when the collateralized asset's value falls below the threshold. The liquidation process is called by an external actor.
Just for this section, we consider a time frame of 1 year. We notice that borrowing orders have been liquidated during the months of MAY 2022 and June 2022 among other times, that is during the bear runs. So we can clearly say that this market volatility did result in a lending contract of 700$ getting liquidated.
But the important takeaway here is that during bull runs, its more likely that borrow orders will get liquidated.
Top coins borrowed and their trend
We now look at the top coins that interacted with the borrowing contracts. That is either they were borrowed from the pool or they were repaid to the pool. But only as borrow feature.
Among the top 5, 3 of the coins are stable coins while the other is WETH- wrapped Ether. NMR is somewhat an outlier. Numeraire (NMR) is an Ethereum token that powers Numerai, a San Francisco-based hedge fund that crowdsources artificial intelligence to make investments in major stock markets around the world.
But again we see that This suggests that users look towards stablecoin during uncertainty.
Swaps
Swaps occur when an user deposits his assets in return for something he wants. Everything happens in the same transaction and hence he does not owe, nor is owed by anyone. A simple exchange of tokens.
We now look at the reactions from users during these volatile condtions.
Top 5 pools
We now look at the top 5 pools. We decide upon the top 5 pools based on the amount of assets (USD) it handled during that day.
Notable observation
- The peak of amount handled is on Jun 13 2022. with USDC-WETH pool handling swaps worth 120M USD
- We notice that the top pool is USDC-WETH pool
Traded volume comparison
Now in the last section, we finish off our analysis with one last visualisation. We now compare the total volume of swaps handled by Sushiswap and Uniswap during the volatile period.
As expected, we clearly see that
- the peak of amounts swapped occurred during the volatile time ( June 13-16,2022).
- Uniswap processed more amount than Sushiswap.
Oooof, That was pretty long. So its better we summarise it.
Summary
- ETH wasn't the only one slumping. BTC too did, indicating that the entire market was in red
- Sushi, Uni and ETH performed very similarly during the turbulent time.
- TVL of both UNISWAP and SUSHISWAP decreased over time and is yet to recover
- Lending withdrawals and borrow orders increased significantly in the aftermath of Fed announcement.
- Liquidations of borrowing contracts occurred during this period.
- The total swap volume increased significantly denoting high activity. with USDC-WETH pool processing the highest.
- Uniswap has processed more amount than Uniswap.