There are many coins that are correlated with each other in price movement. For example, Bitcoin is a crypto coin which all altcoins follow. In the same way, some coins have similar price movement like Hive and Steem, and also many other coins are correlated.
Correlated Coins and Their Movements
It depends on what the correlation is about because of being in the same ecosystem, or because of project similarity and partnership. That’s why trading in such coins or investing in a liquidity pool is safer. Liquidity pool is an investment place where you put your coins in the pool and provide liquidity. Transactions need liquidity and your are the provider, for every transaction you will get earn.
In the Hive ecosystem there are also many tokens that are similar in price movement. Among them, the best are #HIVE and #LEO token. I have often noticed that when Hive price goes up, the #LEO token price also follows. That means their price movement is same and also both these pairs are strong coins with strong fundamentals which will surely reduce the risk of loss.
Many people may be thinking where to invest in liquidity pool. On #hive-engine, #tribaldex, #leodex or #beeswap liquidity pools are available, which you can create with any pair. Among many pairs, the swap.hive:leo pair is the best option where you can easily earn 10–15% APR. Another big benefit of this pair is that many users are already invested, so more benefit can be taken.
Lions have both these coins where they are holding hive and also leo tokens. If they have liquid amount then I will surely prefer them to invest in liquidity pool which will help them passive income and also they will remain invested.
Hive and Leo token are a very good pair for providing liquidity, because demand is high and in case of many transactions, more trade is possible. The more transaction means the more liquidity required and in this way your profit ratio will increase as well. When we put our Hive and Leo in the pool, they are used as liquidity, and in this way we get profit.
Creating a liquidity pool is very easy and it can be done in just few steps. In any of the 3 exchanges I mentioned, you can do it. In my view #Tribaldex is better which has user friendly interface and very simple. First, login with your Hive account. Then go to liquidity pool and search for the token pair.
In the simple search bar, search swap.hive:leo and select. Click on create, write the amount of Hive and Leo, and create the pool. Now your amount is invested in the liquidity pool, and you will keep getting profit on every transaction. Remember, this investment has both risk and reward.
Risk : Reward Ratio
I think the reward ratio is more than the risk in the liquidity pool but it also depends on token selection. If tokens are selected whose price movement is similar, then rewards are more. But if a risky token is selected, then the chance of loss also increases.
In what case loss? If one of your tokens performs well and the other lags, then your tokens keep rebalancing, which reduces your token quantity. But if you select the right tokens, then you get 2 benefits from the liquidity pool: one, you keep getting APR profit from the pool, and second, your wealth keeps growing.
Have you ever invested in a liquidity pool? How helpful was my post for you? Share your opinion in the comments so that the next post can be improved.
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