85% of concentrated liquidity is underutilized — Meaning for DeFi?
A recent Dune report reveals that concentrated liquidity, designed to enhance capital efficiency in decentralized exchanges, is largely underutilized. In the first half of 2026, an average of 29.4% of liquidity across major protocols like Uniswap v3/v4, PancakeSwap v3, and Aerodrome Slipstream was idle—outside active trading ranges—resulting in no fee generation. This represents about $542 million in idle capital weekly and an estimated $150 million in lost annual fees for LPs. When considering technically available but unused liquidity, the underutilization rate rises to approximately 85%.
The study indicates that much of this idle capital, particularly over $200 million untouched for more than 90 days, stems from liquidity providers not actively managing their positions. Individual investors, not automated managers, hold the vast majority of this idle liquidity (e.g., 94% on Ethereum). Automated managers maintain far more active and in-range positions.
Notably, Uniswap v4 has not resolved the issue; about 30.5% of its liquidity remains out of range, and while it introduced hooks for external yield strategies, only 10% of its TVL uses them, with none currently generating yield from idle capital.
ambcrypto07/18 00:03