Automated market makers (AMMs) on Ethereum are contracts that provide liquidity for token swaps while using relative levels of liquidity to establish clearing prices. For a given market, traders exhibit a demand for underlying liquidity, and trade volume relative to liquidity reflects this implicit demand. In an attempt to meet this demand, AMMs offer a share of trading revenue to providers of liquidity. Since token pairs are balanced at equilibrium, price divergence creates arbitrage opportunities to rebalance the pair. In particular, when a token price rises relative to the other token, it is swapped out in favour of the lower value token. This reduces the value composition of the token pair. For a liquidity provider, simply having held the tokens separately would have yielded a better return. This category of opportunity cost to liquidity provision is known as impermanent loss. The profit function for a liquidity provider is the gain in revenue minus the impermanent loss. For token pairs that are highly correlated such as stablecoin pairs, the impermanent loss is close to zero and the revenue is relatively high. The profit function for supplying to these pairs is then almost guaranteed to be positive. Conversely, for tokens that are not correlated with other tokens exhibit fairly high levels of impermanent loss, reducing the desirability for liquidity provision. The lower levels of liquidity then further exacerbate the situation since low liquidity pairs are volatile. If this wasn't enough, low liquidity tokens also struggle to attract trade volumes since gas prices are a fixed cost. Markets that are characterized by significant fixed costs exhibit increasing returns to scale. In other words, stablecoin pairs form a sort of monsopsony over liquidity providers. For these reasons, this paper argues that the incentives created by traditional AMMs do not properly relate to the market for liquidity and as such there is an over provision of liquidity to correlated pairs and an underprovision to tokens which are based on sound fundamentals but are otherwise uncorrelated with other tokens. In particular the price of LP tokens do not reflect the marginal price of liquidity. If they did, the stablecoin oversupply would be reduced and general returns in DeFi would rise significantly.