85% of DeFi liquidity is underutilized, resulting in $1.6 billion of capital inefficiently deployed.

by
Alyssa Davidson

Posted: July 16, 2026 10:25 AM Updated: July 16, 2026 10:25 AM

by Anastasia Oh

Edit and fact check date: July 16, 2026, 10:25 AM

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A new study by on-chain analytics platform Dune, commissioned by DeFi ecosystem 1inch, shows that a significant portion of liquidity concentrated on decentralized exchanges remains untapped. The study found that about 85% of tracked liquidity, or about $1.6 billion out of the $1.84 billion analyzed, was underutilized at any given point in time. This includes approximately $542 million that remains completely idle and outside the active trading range during an average week.

The findings highlight the growing efficiency challenges of decentralized liquidity markets as tokenized assets and institutional capital increasingly move on-chain. Liquidity pools have been the foundation of DeFi’s growth, but the report suggests that current concentrated liquidity models may struggle to support large-scale adoption without improved capital utilization.

The analysis examined four focused liquidity platforms – Uniswap v3 and v4, PancakeSwap v3, and Aerodrome Slipstream – across seven blockchain networks, including Ethereum, Base, Arbitrum, BNB Chain, Unichain, Polygon, and Optimism. Dune collected weekly data from January 6 to June 30, 2026, tracking approximately 200 major pools based on 30-day trading volume for each platform. The data set covers between 559 and 776 pools, representing an average liquidity of $1.84 billion. The study also compared several schedule product liquidity models as benchmarks, including Uniswap v2, PancakeSwap v2, and Aerodrome’s default pool.

“DeFi’s structural inefficiencies are leaving liquidity providers with billions of dollars of underutilized capital and millions of dollars in fees on the table. If the industry is serious about bringing TradFi’s trillions of dollars on-chain, fixing this problem must be a top priority,” 1inch co-founder Sergej Kunz said in a written statement. “The emergence of shared liquidity models and AI has the potential to create a much more efficient future for liquidity providers, which is why 1inch launched Aqua, set to help LPs maximize their capital and earn more on every dollar,” he added.

Liquidity efficiency issues across DeFi markets

According to the study, idle liquidity (capital located outside the price range that can generate fees) accounted for an average of 29.5% of concentrated liquidity over the 26-week study period. This ratio has mostly remained between 25% and 35%, peaking at nearly 41% in early February, equivalent to about $542 million in inactive capital.

Research shows that these inefficiencies can result in significant lost revenue opportunities for liquidity providers. Based on liquidity levels outside the estimated range and blended fee revenues, the report calculated that inactive positions could account for approximately $150 million in unrealized annual fee revenues.

Further analysis identified several factors influencing liquidity utilization. Larger positions generally had lower idle rates, with positions under $1,000 experiencing an idle rate of approximately 54%, while positions over $1000 experienced an idle rate of approximately 26%. However, large positions still accounted for the majority of inactive capital, with positions above $1 million representing approximately 47% of idle liquidity, and positions above $100,000 representing approximately 76%.

The study also found that price movement distance has a greater impact on liquidity inactivity than market volatility. Even during periods of relatively low volatility, liquidity positions are more likely to go out of bounds if prices deviate significantly from their original levels.

Our analysis shows that no particular liquidity design can completely avoid the problem. Idle liquidity levels vary across trading pairs and platforms, with Uniswap v4 showing similar levels of inactive liquidity as Uniswap v3 at around 30%. Stablecoin pools have experienced similar problems, as liquidity providers often set narrow price ranges that can be affected by minor price movements.

The study also pointed out differences between personal and managed liquidity positions. In Uniswap v3, individual wallets accounted for approximately 82-94% of idle liquidity across the chains analyzed, while professionally managed positions and market making systems generally kept liquidity more consistent within the active range. Incentivized liquidity models, such as Aerodrome’s staking pool, have reduced idling levels but have not eliminated the problem. The lowest measured idle percentage is approximately 16%.

“Decentralized exchanges have grown into one of the deepest and most liquid markets in cryptocurrency, now competing with centralized exchanges and traditional trading venues,” Dune research director Filippo Armani said in a written statement. “Our research shows that it has reached this scale even though much of the liquidity is not yet fully operational. It is easy to imagine what these venues will do as efficiencies improve and institutional capital continues to arrive. Getting there will depend on accurately measuring liquidity across all venues and chains in real time, which is exactly the kind of on-chain visibility Dune has been building,” he added.

The report concludes that improving liquidity efficiency will become increasingly important as DeFi markets expand and attract more traditional financial assets. Better measurement, real-time monitoring, and new liquidity management approaches can help reduce inactive capital and improve the efficiency of decentralized trading infrastructure.

As a dedicated journalist at MPost, Alisa specializes in the broad areas of cryptocurrency, AI, investing, and Web3. With a keen eye for new trends and technologies, she provides comprehensive coverage to inform and engage readers about the ever-evolving digital financial landscape.

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