I started my investment in the liquidity pool with the swap.hive:Colony pair. Until now, this is one of the best pairs giving high APR, and both coins also have great potential for wealth growth and are strong projects. Since it is giving passive income and wealth growth, I thought why not start my investment career with this? Therefore, today I invested 1.4 swap.hive and 1816 Colony token in the liquidity pool.
WHAT I LEARNED FROM LIQUIDITY POOLS
Before I made my investment, I decided to understand what a liquidity pool is, how it works, and what profit and loss can happen. I have heard many people talking about liquidity pool investment. They tell about profits but hide the real thing and that is the loss side. If you are willing to invest in pools then I will recommend to learn about first that how it works, if understood then invest properly.
In today’s post, I will cover all of this and explain why I chose this pair for investment. First, let’s understand what a liquidity pool is. A liquidity pool is a place where you provide both tokens as liquidity so that transactions can happen easily.
In other words, it is a place where you keep your coins to increase liquidity meaning to make trading easier for traders, so they can buy and sell smoothly. During this time, when you provide liquidity, it is called a liquidity pool. This type of investment gives you APR profit, and you keep earning a share of profit from every transaction. This is the profit you will get from this pool.
Now why did I choose this pair? The main reason is that both these tokens are becoming popular now. When choosing tokens for liquidity pool investment, you should select those that have high trading demand, because more transactions mean more profit for you. Never choose the pair which have no demand or the users are not interested with it.
I have noticed that many people are becoming more interested in the #ArcadeColony project. I joined ArcadeColony game projects on Discord and saw that there is a lot of activity from gamers it has become a very active channel and more users are interested in buying #Colony and #script tokens. Colony is more better because of its cheapest price right now.
I see many posts regarding these #arcadecolony projects where people are showing their interest. They are continuously investing in #Colony and #Script projects. The staking and card buying in these games is also increasing. Seeing all this, I thought #Colony is a very good token for liquidity pool investment at this time.
It’s obvious that swap.hive has demand like a stablecoin just like USDT is in centralized exchanges, similarly swap.hive has top demand in Hive exchanges. That’s why I chose this pair for investment, because it will give me passive income along with wealth growth.
That’s why today I started my first investment. The process to invest in a liquidity pool is very easy. First, you need to log in to the #TribalDex exchange with your Hive account. After that, confirm that you have both tokens in your wallet which is necessary for investing in pool.
That means you must have swap.hive and Colony tokens in your wallet. If you don’t have them, first deposit swap.hive and then buy Colony tokens with it. Once both tokens are available in your wallet, the next step is to go to the liquidity pool section.
There, you will see the Create option, create this pair and then click on Add Liquidity. Now it depends on you how much investment you want to start with. I started with 1.4 Hive and 1816 Colony, and successfully added them to the pool as my investment.
UNDERSTANDING THE RISK: IMPERMANENT LOSS
I have already discussed its profit part, now let’s talk about the loss.
Yes, there is also a loss and that is called impermanent loss.
Because in a liquidity pool, your two tokens keep rebalancing, so if one token’s price moves much higher than the other, impermanent loss can happen.
That loss stays only until the token returns to its normal position. The loss is not finalized until you withdraw from the liquidity pool that’s why it’s called impermanent loss, meaning a temporary loss. If your vision is long-term holding, then there is nothing like loss here.
Have you ever invested in a liquidity pool? Do you think this pair is the best for investment at this time? Share your opinion in the comment section so that the next post can be even better.
I hope you find this post useful and informative. If you do, please remember to reblog it so that it reaches as many people as possible and that they can benefit the most from it. Also, remember to upvote, which will help me financially and grow my account.
Thank You!
Best Wishes.