Here is why a massive $1.6 billion in crypto liquidity is sitting idle and wasting away

Research conducted by analytics firm Dune and commissioned by decentralized exchange aggregator 1inch has revealed that approximately $1.6 billion of liquidity across major decentralized exchanges remained underutilized during the first half of 2026. This amount accounts for 85% of the $1.84 billion tracked in concentrated liquidity pools on platforms such as Uniswap, PancakeSwap, and Aerodrome. Roughly $542 million, or about 29.5% of this liquidity, regularly sat completely outside the active trading ranges, meaning it generated no trading fees and provided no market depth during that period.

Concentrated liquidity pools allow liquidity providers to set specific price ranges for their deposited assets, earning fees only when the market price remains within these ranges. When the price moves beyond these bands, the liquidity becomes inactive until the provider adjusts the range or the market price returns. Dune’s analysis, covering the period from early January to June 2026 across seven blockchain networks, found that the share of out-of-range liquidity remained between 25% and 35%, spiking to nearly 41% in early February during significant market movements such as bitcoin’s drop from $90,000 to about $60,000. The study highlighted that steady price trends tend to strand more capital than volatile but range-bound price actions.

The data also showed that larger liquidity positions of over $1 million were less likely to be out of range compared to smaller ones, but nonetheless, these large positions represented about 47% of the idle capital, amounting to roughly $260 million. Furthermore, liquidity deposited directly via individual wallets, which require manual range adjustments, contributed to 82% to 94% of the idle liquidity on Uniswap v3, indicating that manual management of liquidity positions is a major factor in inactivity. Dune estimates that providers with out-of-range liquidity could be missing approximately $150 million in annual fees, based on an annualized median fee rate of around 35%.

The research underscores the challenges liquidity providers face in managing active positions, as adjusting price ranges entails transaction costs, execution risks, and potential exposure to adverse price movements. As decentralized finance continues to grow, with more users and traditional assets entering the market, the inefficiency of idle liquidity could become increasingly costly, leading to thinner market depth and lost fee income. This study was conducted ahead of 1inch’s planned introduction of a new liquidity protocol called Aqua, which aims to address these issues by optimizing liquidity deployment.