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An Empirical Study of Market Inefficiencies in Uniswap and SushiSwap


  • Jan Arvid Berg
  • Robin Fritsch
  • Lioba Heimbach
  • Roger Wattenhofer


Decentralized exchanges are revolutionizing finance. With their ever-growing increase in popularity, a natural question that begs to be asked is: how efficient are these new markets? We find that nearly 30% of analyzed trades are executed at an unfavorable rate. Additionally, we observe that, especially during the DeFi summer in 2020, price inaccuracies across the market plagued DEXes. Uniswap and SushiSwap, however, quickly adapt to their increased volumes. We see an increase in market efficiency with time during the observation period. Nonetheless, the DEXes still struggle to track the reference market when cryptocurrency prices are highly volatile. During such periods of high volatility, we observe the market becoming less efficient - manifested by an increased prevalence in cyclic arbitrage opportunities.

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  • Jan Arvid Berg & Robin Fritsch & Lioba Heimbach & Roger Wattenhofer, 2022. "An Empirical Study of Market Inefficiencies in Uniswap and SushiSwap," Papers 2203.07774,, revised May 2022.
  • Handle: RePEc:arx:papers:2203.07774

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    References listed on IDEAS

    1. Guillermo Angeris & Tarun Chitra, 2020. "Improved Price Oracles: Constant Function Market Makers," Papers 2003.10001,, revised Jun 2020.
    2. Lioba Heimbach & Ye Wang & Roger Wattenhofer, 2021. "Behavior of Liquidity Providers in Decentralized Exchanges," Papers 2105.13822,, revised Oct 2021.
    3. Robin Hanson, 2003. "Combinatorial Information Market Design," Information Systems Frontiers, Springer, vol. 5(1), pages 107-119, January.
    4. Vincent Danos & Hamza El Khalloufi & Julien Prat, 2021. "Global Order Routing on Exchange Networks," Post-Print hal-03455981, HAL.
    5. Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 241-261.
    6. Victor Bernard & Jacob Thomas & James Wahlen, 1997. "Accounting†Based Stock Price Anomalies: Separating Market Inefficiencies from Risk," Contemporary Accounting Research, John Wiley & Sons, vol. 14(2), pages 89-136, June.
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    Cited by:

    1. Deborah Miori & Mihai Cucuringu, 2022. "DeFi: data-driven characterisation of Uniswap v3 ecosystem & an ideal crypto law for liquidity pools," Papers 2301.13009,, revised Jan 2023.

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