On December 1, 2020, Ethereum launched a separate proof-of-stake Beacon chain. On September 15, 2022, the original Ethereum Mainnet merged with the Beacon Chain to exist as one chain.

After the Merge, Ethereum is a PoS blockchain, with the PoW chain becoming a thing of the past. A difficulty bomb will reduce mining rewards, making mining on the chain unattractive. Discussion has arisen regarding miners resisting the change and continuing with a forked PoW version (or versions) of Ethereum, but the main Ethereum blockchain will be the PoS one without miners.

Post-Merge, Ethereum will call on validators instead of miners to run the blockchain. Validators must lock up 32 ETH to support the blockchain’s function while earning rewards for doing so. Other methods also exist for contributing to the network via staking, such as services offered by crypto exchanges.()

All these uncertainty about ETH value after the merge made market makers to feel risky about their assets on platforms like Sushiswap. In this bounty we were asked to check this uncertainaty and see how market makers reacted to the merge in two weeks before and after the Merge.

Analyze the behavior of Sushi MMs 2 weeks prior to and after the merge. How much capital did they withdraw?

In the two above charts, you can see the total USD volume of assets that market makers added or removed to the Sushiswap pools.

The total USD volume of actions in two weeks before and after the merge was very close to each other, but as you see in the above chart, the most volume of actions in pre merge belongs to “removing liquidity“ actions, while after the merge, USD volume of adding and removing liquidity was close to each other to some extent(71 M USD for adding liquidity and 60.8 M USD for removing liquidity).

In all these two weeks, the most USD volume of liquidity transactions belongs to “removing liquidity“ from Sushiswap pools, it was about 2.4 times more than the USD volume of “adding liquidity“ transactions.

In summary:

USD volume of removing liquidity before the merge > USD volume of removing liquidity after the merge

USD volume of adding liquidity before the merge < USD volume of adding liquidity after the merge

total USD volume of removing liquidity trxs > total USD volume of adding liquidity trxs

In the below chart, you can see the daily changes for USD volume of adding or removing liquidity transactions on Sushiswap:

As you see in the above chart, t==he highest volume of liquidity transactions was submitted on the day before the merge and the day of the merge(Sep 15th).==

We can say that all the liquidity transactions on Sep 14th, belongs to “removing liquidity“ actions. On the day of the merge and the day after that, most volume of transactions belongs to “adding liquidity“ transactions.

==As days go further after the merge, the USD volume of liquidity transactions decrease, while before the merge this volume had a positive trend in an overall view.==

In the below charts, you can see these changes based on each pool on Sushiswap:

which pools/chains got affected the most?

In the above charts you can see the top 30 pools based on USD volume in pre Merge and Post Merge seperately.

In both of period of time, USDC-WETH pool had the highest volume. It is interesting to see that in pre Merge, all the transactions on this pool belongs to “removing liquidity” transactions, while after the merge, the USD volume of “adding liquidity“ to this pool was about 2 times more than the USD volume of “removing liquidity“ transactions.

In pre Merge, Market Makers only did “removing liquidity“ transactions in 75% of top 30 pools, while after the merge in 20% of top 30 pools this happened.

In post Merge, Market Makers only did “adding liquidity“ transactions in 26% of top 30 pools.

==The highest volume of adding liquidity in pre merge, belongs to SYN-WETH SLP pool which was 1.65 M USD, while the highest volume of adding liquidity in post merge, belongs to USDC-WETH SLP which was 49.5 M USD.==

==The highest volume of removing liquidity in pre merge, belongs to USDC-WETH SLP pool which was 36.6 M USD, while the highest volume of removing liquidity in post merge, belongs to USDC-WETH SLP which was 25.6 M USD.==

In the next part we will check if the Market Makers that removed liquidity before the merge, had added liquidity after the merge again or not:

Have the market makers redeployed back their capital? Can we say anything about their identity (Tokemak, etc)?

758 Market Makers were active before the merge. Based on the above chart, 672 of Market Makers that removed liquidity before the merge, did not redeploy their asset after the merge and only 86 of Market Makers redeployed their assets after the merge.

The highest USD volume of redeploying belongs to “0X60…83F“ that redeployed more than 29.8 M USD after the merge.

The USD volume of redeploying of only 5 Market Makers was more than 5 M USD after the merge. This means that ==about 6% of Market Makers redeployed more than 1 M USD after the merge.==

In the below chart I showed the top Market Makers that withdraw the highest volume of asset before the merge:

In the above chart, you can see the identity of top 10 Market Makers that withdrew the highest USD volume of asset is shown. The highest volume belongs to ‘0X69…8E1‘ that withdrew more than 15 M USD.

3 Market Makers withdrew more than 10 M USD before the merge.

Tokemak and Matos withdrew more than 6.8 M and 2.7 M USD respectively.