Uniswap V4 Concentrated Liquidity Pricing: a Machine Learning Model for U.S. Institutional Liquidity Providers
DOI:
https://doi.org/10.70393/6a696574.333836ARK:
https://n2t.net/ark:/40704/JIET.v1n1a03Disciplines:
Computer ScienceSubjects:
Machine Learning ModelReferences:
25Keywords:
Uniswap V4, Machine Learning, U.S. Institutional LPs, DeFi Institutionalization, Risk Management, Stacking Ensemble LearningAbstract
Amid the institutionalization wave of Decentralized Finance (DeFi), U.S. institutional Liquidity Providers (LPs) have emerged as the core incremental capital for leading Decentralized Exchanges (DEXs). However, the adaptation gap between Uniswap V4's concentrated liquidity mechanism and institutional risk preferences, as well as regulatory compliance requirements, has hindered their market entry. This study focuses on the integration of "technical characteristics - institutional constraints - precise pricing" and constructs a machine learning pricing model optimized across three dimensions: return, risk, and compliance. By integrating Uniswap V4 on-chain data, institutional risk preference data, and market data, a Stacking ensemble architecture combining LightGBM and CNN-LSTM is designed, incorporating 22 core features to achieve precise pricing. Empirical results show that the model's Mean Absolute Error (MAE) on the test set was reduced by 37% compared to the benchmark, and the Root Mean Square Error (RMSE) is reduced by 42%. The Sharpe ratio reaches 1.87 (an increase of 62% compared to the benchmark), with a volatility of 15.3% and a compliance adaptability score of 91. In the case study, a $150 million liquidity supply achieved a 19.7% annualized return and an 8.3% maximum drawdown, successfully passing SEC compliance review. This research fills the gap in institution-oriented pricing models for V4, improves the institutional extension of Automated Market Maker (AMM) pricing theory, and provides a risk-controllable and compliance-adaptable pricing tool for U.S. institutions participating in DeFi, promoting the transformation of the DeFi ecosystem towards standardization and institutionalization. By aligning the V4 Hook mechanism with U.S. regulatory frameworks, this research provides a scalable technical standard for institutional DeFi adoption, reinforcing the competitive advantage of the U.S. Web3 financial ecosystem.
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