How to make money with cryptocurrency liquidity pools
The cryptocurrency market is rapidly growing, and with it, new passive income options are emerging. For example, participating in liquidity pools.
This is an opportunity to earn money from the regular activity of exchange users, without the need to trade daily or guess price movements.
A liquidity pool is a shared pool of cryptocurrencies that users deposit on the exchange. These funds participate in the exchange system, ensuring fast and smooth exchanges between coins.
When you add your coins to the pool, the exchange uses them for trades between users, and distributes a portion of the fees from these transactions among all liquidity providers.
Essentially, it's a way to earn passive income: coins work for you, and profits are generated even when the market moves in any direction.
Where can you make money on liquidity pools?
Liquidity pools are available on most major platforms. The most commonly used are Binance, Liquid Swap, Uniswap, PancakeSwap, Curve, and Raydium.
They work on the same principle: you deposit two coins into a pair, and the platform automatically distributes your rewards.
Earnings depend on several factors. The most important is activity within the pool. The more exchanges users make, the more commissions are collected, and the higher your income.
The pair's popularity, liquidity depth, exchange reward tokens, and sometimes even the volatility of the coins also play a role—the higher the fluctuations, the more active the trading.
An important detail is the impermanent loss. This is the temporary difference between the price of coins in the pool and the market price of the same coins. This can reduce the final profit, especially if the pair significantly changes in value.
Which pairs provide the highest returns?
Pool profitability fluctuates constantly, but certain pairings traditionally yield the highest returns. The following pairings typically yield the highest returns:
- from new coins that the exchange is actively promoting;
- from the exchange's own tokens (BNB, CAKE, UNI);
- in "volatile" pairs, where exchanges are constantly taking place.
In practice, the following pairs often show high returns:
| Pair | Exchange / platform | Profitability, % per annum (APR) | Comment |
|---|---|---|---|
| BNB / USDT | Binance (Liquid Swap) | ~7–12% | High liquidity, stable trading volumes. |
| ETH / FDUSD | Binance | ~6–9% | Top coin + stablecoin, moderate risk. |
| UNI / ETH | Uniswap | ~20–60% | Increased profitability through active trading. |
| CAKE / BNB | PancakeSwap (BNB Chain) | ~30–100% | One of the most profitable pools, but also with a higher risk of volatility. |
| WETH / USDC | PancakeSwap (Base) | ~15–40% | Profitability is generated through turnover and incentive programs. |
| SOL / WLFI | Raydium (Solana) | ~18–42% | Trend pool, WLFI token is more risky. |
| RAY / SOL | Raydium (Solana) | ~10–25% | Classic Solana ecosystem pool with RAY bonuses. |
Specific liquidity pool yield figures are constantly changing, so below are approximate figures for popular pairs. This table is intended to show the order of returns, not the exact daily figures.
These pairs attract a large number of traders, so commissions are collected regularly and income remains stable. If the exchange launches a promotion or stimulates liquidity , profitability can increase significantly.
An example of earnings on the Binance exchange: For clarity, let's look at the BNB/USDT pool.
You choose this pair, deposit, say, $2,000 in both coins, and become a liquidity provider. The exchange begins distributing to you a portion of the fees generated by the pool's active operation. If the average return is around 10% per annum, you'll earn approximately $200 per year.
Income may be even higher during peak demand, advertising campaigns, and increased activity within the pair.
The Pros and Cons of Earning on Cryptocurrency Liquidity Pools
Liquidity pools allow you to earn a stable passive income without engaging in daily trading. You can deposit small amounts and withdraw your coins at any time. On popular pairs, income is generated daily and is not dependent on market trends.
But there are also downsides . During price fluctuations, the ratio of coins within a pool may change, meaning you won't receive exactly the same amount of coins when you withdraw them. Some blockchains have quite high transaction fees, so it's only profitable to invest large amounts. And if the pool is unpopular and has few participants, your income can fluctuate significantly from day to day.
Liquidity pools are a convenient and straightforward tool for generating passive income. You provide the exchange with coins, and it shares a portion of the fees with you. Popular and active pairs with high volumes of exchanges typically generate the highest returns.
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