Stop. 

If you are moving with size (1 ETH+) on fresh tokens, read this thread. You need to learn how to LP. 

Dumping a big clip into shallow liquidity will hurt you (and every other holder) due to slippage. You literally get paid to sell when you provide liquidity. It is the best way to exit. 

Let's examine why 👇

First, let’s cover what it means to provide liquidity.

Liquidity pools are smart contracts. They contain a pair of tokens provided by users, the liquidity providers. These pools use algorithms to set the token prices based on the ratio of assets in the pool.

Building /nounspace | Founding Member /atxdao | Creating community and good vibes wherever I go.

High liquidity makes it easy for users to exchange a pair of tokens quickly, with size, and at a specific price point.

Low liquidity will make transactions fail as the price moves erratically. It also causes high slippage for large transactions.

Anyone can provide liquidity.

Choose the price range that you want to provide liquidity within. Then deposit the paired tokens at a ratio that matches the range. The ratio depends on how far your range extends in either direction of the current price point.

As the price point moves through your range, your pool will automatically exchange one type of token for the other. 

As this happens, you will earn a share of the trading fees generated by the platform, based on how much of the liquidity you are providing in that range. If you’re providing 20% of the liquidity for a price point, you’ll receive 20% of the shared fees when it moves through that price point.

At any point in time, you can choose to remove your liquidity. You’ll receive back a new ratio of tokens based on the current price.

For an ETH / Token X pool, if the price of Token X has gone up since you created the pool, then your pool will have sold those tokens for more ETH. 

And vice versa - if the price has gone down, your pool will have bought more token X.

If you provide liquidity in a range on only one side of the current price point, then you will only have to provide one token of the pair. 

For example, if you provide above the current price point on an ETH / Token X pool, then you’ll only provide Token X. As the value of Token X rises through your pool, it will automatically convert your Token X to ETH at higher and higher price points. 

And it will do this without negatively impacting the price.
(as it would if you sold Token X directly)

If the price moves out of your range, your pool will have converted completely to one or the other of the token pair. 

(Although if the price is moving quickly, removing all of the liquidity at once can be challenging - pro move, remove 75% a couple times if it’s failing at 100%)

So in general, is it worth it to LP instead of just hold? 

It’s complicated. I still find this article a great read on how to weigh the option.

So in general, is it worth it to LP instead of just hold? 

It’s complicated. I still find this article a great read on how to weigh the option.  

https://pintail.medium.com/uniswap-a-good-deal-for-liquidity-providers-104c0b6816f2

But we’re talking about a specific situation. Taking profits on a small token. For this, providing liquidity is a very powerful tool.   

On freshly made pools with shallow liquidity, you can: 

    - Receive a large portion of the fees

    - Increase the liquidity of the pool enabling whales to enter with size

    - Take gains gradually on the way up 
(you should be doing this anyway, but this way it is automated)

    - Take gains without negatively impacting the rest of your bag 
(you kept some on the side, out of the pool, right anon?)

One more top level reply, if you are looking to mess with UniV3 position I highly recommend looking @ https://revert.finance/, even if you don't use its autocompounding features it provides a ton of analytics on any given Uniswap pool and found it very useful.

also cc @nbragg

Building /stokefire a mobile strategy game onchain. Run and own poolfish.xyz a calculator for LP providers. Built Potion solo and sold for $300k.

Wow, this thread is really good! It was a  quick read and easy to understand.

Thank you for sharing! I've been wondering what LPs were all about. I had a general sense but this gave me a more detailed understanding.

🍖 x 50 $degen

cc @annoushka.eth remember that bounty? I think this might be real contender