Structure Over Scale: Diagnosing Liquidity Fragility in Concentrated-Liquidity AMMs

We investigate whether liquidity stability in Concentrated Liquidity Automated Market Makers (CLAMMs) is determined by how liquidity is structured (who owns it and where it is placed) rather than by its total value locked (TVL). Using 4,454 pool-day observations from PancakeSwap V3 on BNB Chain, we show that LP ownership concentration is the primary structural risk: pools in which a single LP controls more than 75% of active liquidity exhibit substantially lower seven-day returns and 2.3× higher crash probability, while TVL has no predictive power. We further find that effective buffer liquidity (moderate depth positioned 5-30% from the current price and accounting for at least 20% of active TVL) functions as a shock absorber; yet only 0.8% of pools maintain such buffers, and none of them experience crashes. The absence of effective buffers, combined with either hyper-concentrated or overly dispersed liquidity, produces a U-shaped fragility pattern in which both extremes are unstable and only balanced structures remain resilient. These results demonstrate that in CLAMMs, structure, not scale, governs market stability. CCS Concepts • Social and professional topics → Financial technology.