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The flagship EH-USDC-Pool of Fluid has recorded more than $ 8.5 million in cumulative losses since the launch, according to a dune-dashboard from paradigm researcher than Robinson. The issue: a re -balancing mechanism that not only underlined during volatility, but seems to be systematically unprofitable, even outside of rebalance windows.
The swimming pool, launched in December 2024, was designed to turn off the liquidity of automatically as soon as the price of ETH went beyond ± 10%. That design worked well during periods of modest volatility, but because ETH fell from around $ 3,800 to $ 1,560 and then returned to $ 2,400, the Liquuidity Provider (LP) Capital again dragged into balance. CEX-DEX Arbitration Opportunities flooded all the trading costs income that LPS receives.
Markout data paints a grim image. As the graph shows, LP PNL has been consistently negative, not only during balance again. This is contrary to the assumption that the income from the concentrated liquidity would again compensate for AMM model in balance. Instead, it seems that the entire design structure enabled MEV extracive transactions to bleed the LP value, even under normal circumstances.
Since the board post of 11 May on the problem, co-founder of Fluid Samyak Jain has been playing the defense.
As Sorella Labs CEO, who goes along @0xvanbeethoven, noted, LPS lost millions to herbalance-driven loss-effective subsidy of arbitration without meaningful benefit.
Critics claim that the problem is not only the frequency of the balance, but the fact that arbitrators can consistently extract the value, while LPs are structurally disadvantaged.
The Fluid team has responded to the criticism and draws parallels to the early days of Uniswap V3. Referring to a similar debate on the use of Markouts as a proxy for LP returns, they point out earlier comments from Uniswap researchers, such as Xin Wan, who argued that short intervale markouts can be misleading and cannot fully take reimbursement structure or LP living cycle behavior.
The planned liquid V2 -upgrade – aimed at June or July – will introduce dynamic costs, permissionless pools and adapted LP ranges. It can also work out the LP problems in other ways.
“There are several things that can be added, including adding them via hooks on V2,” Chief Operating Officer DMH told Blockworks. ‘I actually like it [the] Angstrom solution but has to study more, “he added.
As a proposed interim relief, the liquid team sets to distribute 500,000 liquid doks (0.5% of the delivery) for a year to the affected ETH-USDC-LPS, plus $ 400,000/month in rewards until DEX V2 launches.
Instead of increasing the weather bond to reduce the loss frequency, liquid also proposes to limit the range from ± 10% to ± 7.5%, which increases the yield of reimbursements per unit of liquidity, although that is also in balance and potential losses.
This short -term solution has raised eyebrows. “If your Pool loses average money, the increasing concentration will increase both losses and variance,” wrote Robinson. “So more concentrating the liquidity would be a double Whammy.”
Even if DEX V2 LPS gives more control, it assumes that users can model the risk of volatility and choose defensible series, a challenge, even protocol management has difficulty getting into V1 immediately.
It is the honor of Fluid that the team has publicly recognized the issue, and refers their own LP position of $ 1 million as proof of the skin in the game. They also emphasize that correlated couples (such as CBBTC-WBTC) have performed well, and therefore the struggles of the ETH-USDC-Pool are not representative of the wider DEX performance.
Yet the damage to LP Trust is real. Or Dex V2 that can reverse dynamics will be the real test of the United Architecture of Fluid.
For now, the ETH-USDC-Pool is a warning story: capital efficiency can reduce both sides, especially when market volatility meets a rigid strategy design.
