Recently, MMTFinance in the #SUI ecosystem has become very popular, and many people are playing V3 LP (SUI-USDC) in it. Because the coin price has been rising, many people are borrowing SUI to participate in this liquidity pool. However, in the last couple of days, SUI has surged, causing the price of SUI to exceed the price on the right side of the liquidity pool. As a result, the borrowed SUI has all been sold for USDC. If the price of SUI does not drop later, you will have to buy SUI at a high price to repay the loan, essentially earning a bit of interest but losing a significant amount of principal. So how did I play this liquidity pool before?
I adjusted the price range myself instead of using the system's suggested one. By adjusting the price range, I significantly increased the proportion of USDC. For example, the image above shows a 20% price difference given by the system, with the left price at 2.29 and the right price at 3.45. For every 354 USDC invested, you need to invest 100 SUI, which is equivalent to 45% SUI and 55% USDC. If we adjust the price range to 2.29-2.9, then investing 164 USDC requires only 2 SUI, which is equivalent to 3% SUI and 97% USDC. I remember that a while ago, I had a setup with 100% USDC in the pool, and after half a month, I earned over 100 U in interest, ultimately withdrawing 100% USDC. Of course, if you play like this, you need to build the pool at a high position within the SUI volatility range, and the effective time of the liquidity pool will also decrease. It might be that out of 30 days in a month, your liquidity pool is only effective for 20 days, so you also need to find the right price range and adjust it periodically.
Another very important point is to find a strong coin, like SUI, which often leads the market. After a short-term decline, the liquidity pool being all SUI won't be so alarming. Coins like BERA, which have big drops and small rises, can't really be played this way; before long, your USDC will all be exchanged for BERA, locking you from playing the liquidity pool to being stuck in spot trading.
Currently, I am playing the honey-fdusd liquidity pool in @berachain, both of which are stablecoins. There's also a wbera-ibera pool, with bera borrowed from the European market. In fact, earning interest from liquidity pools is secondary; the main goal is whether you can get airdrops from project teams later. Otherwise, if you only focus on that little interest, the principal will eventually get eaten away.
