What to do with a handful of Bitcoin and Ethereum? WBTC/ETH might be a good choice. Consider Uniswap, SushiSwap, or Binance.

Bitcoin saw its largest single-day drop in nearly ten months recently. According to a chart by CoinDesk, on January 21, Bitcoin experienced a 13% decline, marking the biggest drop since March 2020. After briefly surpassing its all-time high, Ethereum followed suit with Bitcoin's downturn, signaling a shift in the trend.

Nevertheless, long-term holders of BTC and ETH remain unfazed by the recent volatility. Some may choose to keep their BTC and ETH in automated market maker (AMM) platforms to provide liquidity and earn fees and rewards.

Let's take a look at the recent developments in the two major AMM platforms, Uniswap and SushiSwap. What choices do BTC and ETH holders have in this evolving landscape?

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Trading Volume and Liquidity: Uniswap Still Leads the Way

Based on several recent samples, the trading volumes of both platforms have been increasing. After experiencing a low point following the cooldown of liquidity mining, liquidity has returned to previous high levels. Competitor SushiSwap has shown significant growth, surpassing its previous high from the vampire attack. Despite Uniswap suspending liquidity mining, it still maintains its advantage.

We have used the volume/liquidity ratio (V/L) in the past to evaluate the profitability for liquidity providers on both platforms. In other words, V/L indicates how much in fees overall and how many shares to get a piece of the pie.

Although SushiSwap is still lagging behind, its V/L has been similar to Uniswap since December last year.

SushiSwap's WBTC/ETH Liquidity is Over Twice that of Uniswap

Observing the top four liquidity pools of SushiSwap and Uniswap, the composition is slightly different. Uniswap's top pools have been: WBTC-ETH, ETH-USDT, DAI-ETH, USDC-ETH, while SushiSwap's top four do not include an ETH-USDT pool but include their own token SUSHI-ETH.

Interestingly, while Uniswap's top four liquidity pools range between 180 to 220 million USD, SushiSwap's second to third pools range between 170 to 200 million USD, with its top pool WBTC-ETH boasting liquidity of up to 485 million USD, over twice that of Uniswap's WBTC-ETH pool.

Despite SushiSwap's V/L for WBTC-ETH not matching Uniswap, the fee income from providing liquidity is only 12.34% annually, while Uniswap has 25.83%. Additionally, the annual returns for DAI-ETH and USDC-ETH are better on Uniswap.

Currently, providing liquidity on SushiSwap yields a 0.3% trading fee, with 0.25% going to liquidity providers, and the remaining 0.05% pooled separately, shared among those staking SUSHI and accessing the entire pool's 0.05%.

While the fee annualized return is lower than Uniswap, SushiSwap also offers SUSHI mining rewards as an incentive to remain competitive. Two-thirds of the liquidity rewards in SUSHI require a six-month lockup, so actual returns depend on user behavior.

Non-DeFi Users Can Try Binance's Liquidity Pools

Previously reported on Binance's Earn all-in-one financial page, the exchange has introduced several DeFi-like financial products, including a DeFi-like product called Liquid Swap. Described as DeFi-like, it may operate differently from typical AMMs.

Users unfamiliar with DeFi operations and unwilling to pay high gas fees can experience liquidity pool returns through this product. While the returns may differ from DeFi, the absence of fees and ease of transfer make it a viable option.

It is important to note that regardless of the liquidity pool, there may be impermanent loss situations. Please fully understand the risks before entering.