Aerodrome, which has been gaining traction as a heavyweight staple within Coinbase L2 network Base, reached a record high in weekly trading volume.
The decentralized exchange (DEX), which launched in Aug. 2023, generated $4.7 billion for the week starting Sept. 29, 2024—a figure that is more than the previous two weeks combined, data from DefiLlama shows.
The majority of the trading volume stemmed from Slipstream pools, per a tweet posted by the Aerodrome team on Thursday. Slipstream are concentrated liquidity pools designed to make token swaps have low slippage, a technical term referring to the difference between a trader’s expected price of an asset and the actual price at which the transaction is executed.
“Aerodrome’s launch of Slipstream in May introduced concentrated liquidity on the exchange and transaction volume notably increased after this,” wrote Toe Bautista, a research analyst at crypto market maker GSR, in a Telegram message to Unchained.
While Aerodrome’s volume is significant, the record high in weekly trading volume is not a sign of a broader behavioral shift, argued Bautista. Slipstream or concentrated liquidity pools require large liquidity providers to constantly rebalance their positions, which means a single wallet address can generate millions in trading volume on a daily basis.
“Thus, Aerodrome and Base’s growing DEX volumes are a positive sign, but [that] doesn’t necessarily reflect an increase in swapping activity, rather rebalancing within liquidity ranges,” Bautista said.
Middle East Conflict Sparks Liquidity Rebalancing
Crypto markets have seen volatility over the past seven days in light of several global events such as the military conflict between Iran and Israel. One potential reason liquidity providers are rebalancing their positions and managing their liquidity in higher volumes than before is to mitigate risks or maximize returns in light of the recent serious market fluctuations.
Read More: Rising Middle East Tensions Further Reduce Chances of Crypto Legislation Passing This Year
“My best guess is because there were a lot of bullish signals last week, [liquidity providers] moved their ranges to the upside because many were expecting continued positivity in the markets,” Bautista told Unchained.
“When events in the Middle East created increased market uncertainty, LP positioning most likely had to restructure as price volatility could lead to wider downside.” While these global events may not directly result in more trading on Aerodome, they “could potentially help explain the uptick in volumes,” argued Bautista.
A Lift From High APRs?
Moreover, the annual percentage rates of Aerodrome’s top concentrated liquidity pools by volume can reach upwards of four digits, substantial incentives for people to provide liquidity for the DEX. For example, one concentrated pool for USDC/cbBTC which has a TVL of $12.7 million fetches an APR of 1,182.2% at presstime, a jump from roughly 83.6% APR between Sept. 26 and Oct. 2, per Aerodrome’s platform and a Dune analytics dashboard created by data analyst who goes by @0xKhmer.
Other top pools also saw their APRs increase by several multiples, though the increase in trading volume happened earlier—on September 30. The APRs were boosted a couple days later.
Trading volume on Aerodrome reaching an all-time high occurred the same week the Base-native DEX surpassed $1 billion in total value locked (TVL), a more than 86% increase since the start of September when its TVL stood at $581.5 million. At presstime, Aerodrome makes up more than half of Base’s total value locked which stands at $2.1 billion.
AERO, the native token for Aerodrome, has remained stable, just rising under 2%, in the past seven days but increased 94% in the last 30 days to $1.07. Holders of AERO can stake their token and receive veAERO, which enables holders to receive a portion of fees generated by the protocol.
