Concentrated liquidity in decentralized exchanges is failing to generate returns when deposited outside active price ranges, leaving substantial capital unproductive. According to recent data, roughly $542 million in liquidity per week sat beyond the ranges where trading actually occurs, meaning that money earned zero fees for providers and contributed no depth to the market. Over time, this pattern has resulted in approximately $1.6 billion in liquidity sitting idle across the ecosystem. The issue highlights a persistent challenge with concentrated liquidity models, where providers must actively position their capital near current prices to capture trading fees. When prices move away from those chosen ranges, the deposited funds become dormant. The findings underscore inefficiencies in how liquidity is allocated on-chain and raise questions about whether current automated market maker designs adequately serve providers seeking consistent yield.
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