You already know that Bidask pools can outperform traditional financial instruments. However, to make your capital work at its peak, it’s vital to avoid the classic traps that catch newcomers.
Let's break down the "basics" of effective farming:
1️⃣ Mistake: Choosing a range that’s too narrow
DLMM technology allows you to concentrate liquidity in a narrow price corridor for ultra-high yields. But if the price moves outside this range, your capital "goes to sleep" and stops generating fees.
💡 Pro Tip: For volatile pairs, choose a wider range to avoid the need to recreate your position every day.
2️⃣ Mistake: Chasing ultra-high APR without considering volatility
Figures like 200% are a great earning opportunity, but it’s vital to understand their nature. Such APRs are often found in pairs with memecoins or new projects where prices move very dynamically.
💡 Pro Tip: Treat these pools as a tool for an active strategy. The high volatility of memecoins generates the "juiciest" fees but requires more attention to your range boundaries and timely position adjustments.
3️⃣ Mistake: Ignoring Impermanent Loss (IL)
Many forget that during a sharp rise of an asset paired with a stablecoin, the protocol will automatically sell the rising asset.
💡 Pro Tip: Remember that a liquidity pool is an accumulation strategy, not just a HODL strategy. If you expect a 200% "moonshot" for a specific token, it might be more profitable to just hold it in your wallet rather than in a pool.
Bottom Line: A successful LP provider isn't the one who found the highest percentage, but the one who knows how to manage their risks and ranges.
Master the Bidask tools and make your tokens work smart!
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