CORRELATED PAIRS: HOW AMMS WIN THE BIGGEST MARKETS

Summary from the TLDR Crypto newsletter

Tokenization's primary structural shift is not settlement efficiency but the formation of correlated asset pairs (NVDA/SPY rather than NVDA/USD), which eliminate the hedging costs embedded in delta-neutral professional market making and let passive AMM strategies close the performance gap against firms like Citadel Securities, which earned $12.2B in net trading revenue last year. The mechanism mirrors DeFi's existing architecture: passive LPs supply correlated pairs where inventory risk is low, while active LPs compete over a small number of high-volume bridge pairs (the SPY/USD equivalent of ETH/USDC), concentrating professional attention where it earns sufficient return. Early evidence supports the thesis: ten tokenized equities trading against SPY in Uniswap pools on Robinhood Chain generated $33M in volume from 11,000+ traders in their first twelve days, including direct stock-to-stock swaps that bypassed dollars entirely. The passive vehicle that made no active decisions now beats roughly 90% of active managers. Passive AMM liquidity is expected to follow the same path as equity markets migrate on-chain and reorganize around correlated pairs.