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What Is Liquidity Mining; A Complete Guide - Hire Bitcoin Bounty Hunters

According to Hire Bitcoin Bounty Hunters, in the cryptocurrency market, mining, investing, and trading all come with risks that make it difficult to stay profitable. Liquidity mining also comes with risks: impermanent loss (IL), which prevents users from providing liquidity without monitoring the market.

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What Is Liquidity Mining; A Complete Guide - Hire Bitcoin Bounty Hunters

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  1. What Is Liquidity Mining; A Complete Guide - Hire Bitcoin Bounty Hunters

  2. Hire Bitcoin Bounty Hunters • Crypto holders can earn rewards for lending assets to a decentralized exchange. The rewards are often derived from trading fees incurred when trading tokens. The fees are on average 0.3% per swap, and the total reward differs depending on the proportion of one's share in the liquidity pool. • According to Hire Bitcoin Bounty Hunters, in the cryptocurrency market, mining, investing, and trading all come with risks that make it difficult to stay profitable. Liquidity mining also comes with risks: impermanent loss (IL), which prevents users from providing liquidity without monitoring the market.

  3. What Is Liquidity Mining; A Complete Guide • Some wonder what IL is, but they also mistakenly believe that it is far more complex than it is. Calculating and predicting impermanent loss can be a different story, but its basic functioning is relatively straightforward. Holding an asset for speculative purposes versus providing it as liquidity to earn fees is considered an impermanent loss. • Since digital acquisitions are highly volatile, it is almost inconceivable to avoid IL. If an asset within the LP of choice loses or gains too much value after being deposited, the user may not profit or even lose money. In the case of Ethereum, for example, the fees granted by farming it can double in value in five days, but the return on investment will not even be half as much.

  4. Massage Therapy • According to Hire Bitcoin Bounty Hunters, if the market returns to its original price, LPs can avoid permanent loss. Losses are only realized if the user withdraws his liquidity. If that does not happen, LPs are forced to withdraw liquidity and realize their IL. In a separate lesson, you will be able to explore impermanent loss in more detail after exploring liquidity mining and yield farming.

  5. Final words • By using their existing assets instead of leaving them in cold storage, liquidity mining helps crypto holders gain passive income by utilizing their existing assets. Each liquidity provider receives a proportional share of the trading fees earned by the decentralized exchange in return for lending assets to it.

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