the inflation rate is lower because it is capped at a multiple of the dollar value of fees generated - most pools (are maxing out their fee-linked emissions caps meaning the constraining factor is the fees generated this just means the emissions rate is lower because the pools aren't generating enough fees for the caps to be anywhere near the previous emissions levels some first day metrics beyond the emissions rate: > trading fees: $253K (-22% vs previous 7d avg) > base volume market share: 51% (-5%) > eod pool tvl: $328M (-10%) > ethereum mainnet volume market share: 0.87% > robinhood chain volume market share: 3.27% granted, we are very early, so there is time for fees and broader metrics to get back to flat at least, but based on the consensus forecasted growth numbers on the timeline over the last few weeks (some saying revenue would 2x from this etc), it's hard to see this as anything other than falling short of expectations the total TVL is now only around $5M lower than it was pre-launch (~$360M) but the more interesting point here is that $240M of this is still in legacy aerodrome and velodrome pools earning no emissions or compensation - the key metric to monitor will be how much of this TVL migrates to the new v3 pools and the impact on emissions most of this data isn't on the public platforms (defillama, artermis etc) yet, so there's still time to close your longs before it becomes accessible and starts being priced in / the bulls who claimed aero would be capturing double digit percentages of market share on mainnet start to unwind there's also still a pretty significant spread between AERO OI and its peer group which implies to me there is still positioning to be unwound - we are already seeing signs of underperformance; now the catalyst is behind us I expect this to accelerate invalidation if OI stops dropping and any of the above fundamental metrics mentioned change significantly

the market structure doesn't reflect this; there appears to be disproportionate residual perps positioning in AERO, which isn't present in similar names or the broader altcoin complex in my view, the market is pricing a successful aero v3 launch and assuming overly optimistic market share capture on ethereum mainnet + other new chains the key point the market is misunderstanding is where aerodrome's historical competitiveness on base stems from, and why it won't translate cleanly to new chains: > aerodrome dominates volume on base because it offers more attractive economics for LPs via the emissions subsidy model, which allows them to undercut uniswap on fees whilst still having reasonable depth > applying the same logic to mainnet and robinhood chain, it initially makes sense to assume that aero will be competitive on these chains too, and perhaps even capture a higher proportion of flow given that there is a larger portion of DEX volume on mainnet routed via aggregators which are front-end agnostic > in reality, the same emissions (or marginally more emissions depending on how you expect sAERO holders to allocate) will now be spread much more thinly across an order of magnitude more TVL / liquidity and pools, damaging the unit economics for LPs > AERO emissions per unit of liquidity drops drastically (on average 22% for every additional $100M of TVL) - a haircut almost equivalent to (and greater than in some cases) the uniswap fee switch > if the economics for LPs are no longer attractive, they are unlikely to provide depth in key strategic markets, leading to disappointment in market share capture, and potentially even loss of market share on base if liquidity is fragmented via more sparse emissions allocation > the highest-volume markets on mainnet are also gigacompetitive (USDT/USDC and ETH/USDC), so heavy depth incentivisation in low fee pools is really the only route to capturing any flow here additionally, the value accrual mechanism for vanilla AERO holders is questionable and arguably weaker than UNI: net value accrued to veAERO (trading fee revenue - dollar value of emissions) has been negative for the duration of the project's life so far, let alone net value accrued to the underlying AERO itself via buybacks and fee capture in the momentum fund - if you calculate the multiple using the revenue actually captured by vanilla AERO, it looks much less cheap relative to peers AERO holders are so hyperfocused on the TAM expansion that they can't see the wood from the trees - what use is a larger addressable market if you lose your competitiveness and subsequent ability to capture it no one is pricing in a scenario where the chain expansion not only fails to materially increase value capture for aero but also actually damages their existing competitiveness on base - the incentives for LPs on mainnet have to come from somewhere.... risk reward is skewed heavily in favour of an AERO short post-announcement - it's a difficult name to hedge given the low correlations as of recent but long SOL or ETH likely makes the most sense (predictable, mostly beta etc)

the ticker is UNI

straight to zro

UNI still performing flat / outperforming broader altcoin / defi universe (+25% last 30d) despite this arguably pretty bearish development coming from the last-ditch attempt to boost revenues by expanding fee switch to base and other L2s coin-denominated OI spiked around the same time this news broke indicating some positioning build up which hasn't yet been fully unwound wondering whether we are due some UNI underperformance if the drop of in LP TVL and lack of impact on revenues continues, at least until OI is back to pre-announcement levels (driven by residual perp positioning unwind) there's still about 2.2M UNI ($8.8M) more OI / positioning than before the announcement which has the potential to be gradually unwound now - also maybe worth comparing this OI delta vs wider market OI and normalising for that to ensure the residual OI is specific to UNI and not general altcoin / defi token OI buildup UNI/BTC still 5% above where it was before the news but in fairness has retraced a decent amount since immediately after so the juice probably wouldn't be worth the squeeze for any sizable short position but I do expect it to unwind at least the remaining 5% of outperformance vs BTC if not more one more point to add on this is that there is a notable lack of future catalysts in the pipeline for UNI, as a token in structural decline with the proliferation of more specialised prop AMMs and the compression of fee capture on stable / high-volume pairs (which are uniswap's bread and butter) the one tail risk here is the blackrock investment, which I feel may have been slightly overlooked, but the sheer volume of institutional partnership headline announcements these days massively dilutes the likely impact of this on price anyway this analysis is from a few days ago so forgive the charts being slightly stale - UNI/BTC is down 8% since then but still think there is some underperformance left given OI hasn't fully reverted

the gift that keeps on giving