Introduction
Binance launched the Alpha 2.0 feature in 2025, allowing users to purchase on-chain tokens directly on the exchange. Since then, they have also periodically airdropped tokens to eligible active users. For users who strive to accumulate trading volume, they can average a profit of 100 USDT each period, which is quite a generous reward. Since the scoring mechanism is public information, are there any potential profit opportunities behind it? This article will guide you on how to participate in liquidity pools with annualized returns exceeding 300% using Alpha tokens, allowing you to seize profitable opportunities that are rarely known in advance.
If you still don't know what the Binance Alpha market is, you can read: (What is Binance Alpha? Changes and investment opportunities from Binance Alpha 1.0 to 2.0)
What is Binance Alpha?
Binance Alpha is designed for users looking to invest in early-stage tokens, providing a channel for on-chain token purchases that allows users to participate in potential token trades directly through the Binance exchange. Active traders can also earn additional income by participating in token airdrops and TGE events.
For those not familiar with Binance Alpha airdrops, you can read: (Complete tutorial on Binance Alpha Points airdrops, with 3 tips to earn 1000 USDT monthly!)
Alpha market creates potential profit opportunities
Although Binance Alpha allows users to buy tokens directly on the Binance exchange, the trading process is not matched by Binance's order book but rather through the automated market maker (AMM) mechanism on decentralized exchanges (DEX). Because of this, regular users can earn trading fees through liquidity pools. Before introducing the AMM mechanism, let’s first take a look at the astonishing trading volume driven by Alpha tokens.
Daily trading volume of Alpha tokens
Opening the Alpha token section reveals that the top trading volume tokens are all BSC blockchain tokens. This is because Binance Exchange launched a double trading volume activity for BSC tokens, leading users participating in Alpha airdrops to prefer trading BSC tokens, resulting in impressive trading volumes. The data is as follows:
$ZKJ: 3.208 billion
$MERL: 352 million
$KOGE: 328 million
$SOON: 324 million
Looking closely at the top trading volume token $ZKJ, we find that from May 17 until now, except for two days of low trading volume, it has maintained over one billion dollars in daily trading volume, which is quite astonishing.
Analysis of the Automated Market Maker (AMM) mechanism
AMMs manage trading through liquidity pools (e.g., ZKJ/USDT). Liquidity pools usually consist of two tokens in a 50%-50% asset ratio. When users trade, AMMs adjust prices based on the token ratio in the liquidity pool without requiring direct matching of buyers and sellers. For example, buying $ZKJ will decrease the amount of $ZKJ in the liquidity pool, thereby raising its price.
The compatibility of Alpha tokens with the AMM mechanism
Airdrop activities have encouraged a large number of users to participate in trading, which has significantly boosted the trading volume of Alpha tokens. The AMM mechanism allows prices to dynamically adjust based on market demand, making it less likely to create spikes even when many users are trading simultaneously; thus, in terms of trading slippage and liquidity pool income, both complement each other.
Profit opportunities for liquidity providers
When users deposit two tokens of equal value into the liquidity pool, the DeFi platform issues liquidity tokens as proof, representing the user's share in the liquidity pool. When trades occur in the liquidity pool, the token holders can collect trading fees as income. The higher the trading volume, the greater the earnings for liquidity providers, which is why recently the annualized yield for popular Alpha token liquidity pools often exceeds 300%.
PancakeSwap Liquidity Pool Participation Tutorial
PancakeSwap is currently the top decentralized exchange on the BSC blockchain, known for supporting a variety of functions including token swaps, liquidity pools, farming staking, and even prediction markets and lotteries which are rare among centralized exchanges. This article leverages the liquidity pool function provided by PancakeSwap to participate in the AMM mechanism.
PancakeSwap Liquidity Addition Tutorial
This article will use the previously mentioned highest trading volume token $ZKJ to teach how to deposit into the liquidity pool.
Enter PancakeSwap's Earn/Liquidity
Search for ZK (the symbol for $ZKJ in PancakeSwap is ZK)
Display multiple liquidity pools; at the time of writing, the APR for the USDT liquidity pool is about 3,000%, the USDC liquidity pool is about 2,000%, and the BNB liquidity pool is around 380%.
Select the liquidity pool to deposit into and prepare the corresponding tokens. For the ZK/USDT liquidity pool with a range of ±0.5%, for every 1,000 USDT deposited, users would need to deposit 508.6 $ZKJ (approximately 1,035 USDT).
Pay gas fees to deposit USDT and ZKJ into the liquidity pool and start earning trading fees.
OKX Web3 Wallet Liquidity Pool Participation Tutorial
OKX Web3 Wallet recently launched the 'Binance Alpha Earning Zone', integrating popular Alpha token liquidity pools, allowing users to participate with one click and earn trading fees. Moreover, the OKX Web3 Wallet conveniently arranges high APR liquidity pools at the top for users to select. I believe that for users unfamiliar with DeFi, the OKX Web3 Wallet will be a more user-friendly storage option.
OKX Web3 Wallet Liquidity Pool Addition Tutorial
No need to enter any webpage; simply open the OKX Web3 Wallet to deposit.
Click the 'Earn' feature and enter Binance Alpha Earning Zone
Select the liquidity pool to deposit into, using ZKJ/USDT as an example.
Set the price range; the platform also offers three options for users to choose from: stable, moderate, and advanced.
Deposit the corresponding tokens. For the moderate range of ZKJ/USDT (±0.5%), for every 1,000 USDT deposited, you would need to deposit 498.27 $ZKJ (approximately 1,014 USDT).
Preview daily earnings and annualized return.
Pay gas fees to deposit USDT and ZKJ into the liquidity pool and start earning trading fees.
What are the differences between PancakeSwap and OKX Web3 Wallet’s liquidity pools?
The differences between PancakeSwap and OKX Web3 Wallet mainly lie in convenience and yields, as follows:
PancakeSwap: More complex operations with higher liquidity pool yields.
OKX Web3 Wallet: The interface is simpler and easier to use, but it also uses PancakeSwap's liquidity pools, which incurs an additional fee, resulting in lower yields.
What factors will affect liquidity pool yields?
The yields of liquidity pools are usually affected by various factors, which may directly impact the earnings of liquidity providers. The following are common factors that influence liquidity pool yields:
Trading volume: As the main source of income for liquidity pools, the higher the trading volume, the higher the earnings that liquidity providers can receive.
Total Value Locked (TVL): TVL represents the total asset value in the liquidity pool. An increase in TVL indicates that more funds are entering the pool, which will dilute the fee income; therefore, the relationship between TVL and yields is inverse.
Price fluctuations: If the token price rises, the value stored in the liquidity pool will also increase, and vice versa when it drops. At the same time, the ratios of the two tokens will also change, and the temporary loss caused by the different proportion changes of the two tokens is called 'impermanent loss'.
Additional staking rewards: For example, on PancakeSwap, the platform often provides extra rewards in $CAKE tokens for staking, which allows liquidity providers to earn an additional layer of income.
Methods to reduce price fluctuations
To avoid price fluctuations, you can use contract trading to hedge. For $ZKJ, you can directly hedge risk on the Binance exchange, but you should be aware that changes in the ratio within the liquidity pool may lead to an imbalance in the hedging ratio. Additionally, when conducting contract hedging, it's also important to consider the current funding rate and include it in the cost/return calculations.
According to the funding history shown in the chart below, the funding rate for ZKJ is mostly 0.005% when the token price is stable, while as the price drops, the funding rate turns negative at around -0.04%. The mechanism of charging fees every four hours will lead to increased hedging costs.
Impermanent loss risk reminder and calculation
Impermanent loss is one of the main risks of participating in liquidity pools, especially since most Binance Alpha tokens are new tokens with volatile prices, which makes the impact of impermanent loss more pronounced. It should be noted that impermanent loss does not represent a loss of principal but rather a loss compared to not participating in the liquidity pool.
For an introduction to impermanent loss and how to avoid it, please refer to: (Introduction to Liquidity Mining Principles)
Impermanent loss calculator
We can use the impermanent loss calculator provided by CoinGecko to calculate potential impermanent losses. Taking the example mentioned earlier, ZKJ/USDT, if ZKJ drops by 50% while USDT remains stable at one dollar, in addition to bearing the loss from the drop in ZKJ's price, one would need to bear an extra 5.71% of impermanent loss compared to not participating in the liquidity pool.
Conclusion
With the Binance Alpha event currently popular and the ongoing promotional activity of double trading volume for BSC chain tokens launched by Binance, users can not only earn stable income through the Alpha Points event but also create additional profit opportunities using liquidity pools. At the end of the article, it is still important to remind you that if you are not fully familiar with DeFi, it is advisable to start with a small amount of capital to avoid unexpected losses.
This report is for informational sharing only and does not constitute any form of investment advice or decision-making basis. The data, analysis, and opinions referenced in the text are based on the author's research and public sources and may involve uncertainties or changes at any time. Readers should make investment judgments cautiously based on their own situations and risk tolerance. For further guidance, it is recommended to seek professional advisor opinions.
