WHAT DO I PROVIDE?
WHAT DO I PROVIDE?

Provide Liquidity to the markets as a Market Maker and Collect Fees

Provide Liquidity to the markets as a Market Maker and Collect Fees

⁠
⁠
⁠

Overview

Your goal is to be the

Market Maker⁠

providing liquidity for a token pair (e.g. USDC|ETH). It’s essential that you believe in both tokens and are OK with owning either. This is important because as the price difference between the pair spreads, you risk owning more of one than the other. And if owning either token is OK, you reduced this risk associated with volatility.

GOAL

In this strategy, your goal is provide liquidity for the USDC|ETH pool. As the market maker, you collect fees when these tokens are swapped (exchanged) for one another.

⁠

IMPORTANT UPDATE (9/22/2021): The new strategy is to provide only one pool with a Large Range (between $500-$900). This gives a ~100%-200%+ APR but requires more attention, specifically on the Bull case. Impermanent Loss increases the tighter the range.

Example:

⁠

LP Strategies - Summary

⁠

There are various strategies to provide liquidity. In this section we will discuss three strategies.

Set and Go: Passive - All in one 10%-40% APR

Sliders: Semi-Passive 40%-75% APR

Two in the Barrel: Passive + Active 75%-150% AP

TDLR: After much research, modeling, and implementing the various strategies, SLIDERS is the current main strategy. This is the JUST RIGHT (middle piggie) mix of passivity income generation (40%-75% APR on the low end).

LP Strategies - Details (optional reading)

Here are the details of each LP strategy.

These methods are only good if you have at least $10K in any one liquidity pool and let it stay in range at least a week every time you start a new the position (e.g. liquidate or reposition). Otherwise fees eat up your profits. Each transaction whether it’s claiming fees, swapping, adding/removing liquidity will cost ~$30-$100 (during medium ETH congestion).