Yes, the crypto market seems to be in a shambles right now. Trading volume is down and the market does not seem to be going up. Even with the recent pump due to some positive news coming about, the market is still not doing that well. Even in the best of times, the market is trading sideways – basically it is just moving up and down within a narrow range. I pretty much expect this to happen as well. I mean the amount of FUD that is being displayed this few weeks tells me that there is some powerful groups that do not want prices to go up. And so what can we do if the market is trading sideways?
Well be a liquidity provider! That is a logical way to gain some good returns without actually doing trading. And what can you do with the cryptos on hand? Selling them might not be that best idea at the moment. Of course sending them to a lending platform to earn some interest is also a good way to get some returns but I think being a liquidity provider in decentralized exchanges has the potential for even better returns. I normally just dump my cryptos into Binance liquidity pools for the simple reason that I feel that they are the safest bet. Binance is the largest crypto exchange in the world right? Yes seems that these few days governments have been targeting Binance but a lot of these “attacks” are just FUD. Even the UK Ban on Binance is not even related to the crypto exchange as in the news. Seems that the UK Ban is on one of its subsidies and it is not the website that have been banned. Please read the correct report here.
And if you have been paying attention, seems that being a liquidity provider does have rather good returns. A quick check on Binance shows that some pools have returns of over 30% APY. Hence I have been moving some of my cryptos from fixed savings into pools. Why not? 30% APY and 5% APY is a big difference. Just take for example VET/USDT pair liquidity pools – it is currently having a 33% APY and my VET is just sitting there barely getting any returns. But of course there is a risk when being a liquidity provider. That is impermeant loss. If you don’t know what impermeant loss is, please take a quick read on this. And readers should be aware that this is a long term strategy. You will most likely not make any returns if you just put the funds in for a few days. In fact, you might take a loss if you do that. So always do your research when going into swaps and liquidity pools. But generally speaking, in relation to markets having wide swings, a market trading sideways would be a safer bet to be a liquidity provider. The impermeant loss will most likely be less and the returns will offset the impermeant loss.
I will update you guys more about my VET/USDT LP journey. Hope that it will be fruitful.
One reply on “I am going in more as a liquidity provider!”
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