Providing Liquidity: Easy LP

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Note: You may see a slightly different UI as we're still working on the stats.

What is Easy LP?

The Easy LP mode provides an intuitive and simplified UI so you can provide liquidity to any of the markets on Perp. It takes the guesswork out of entering a price range for your liquidity providing several options based on historical price data, as well as allowing you to express a bearish or bullish market view.

Note that if you take a neutral view of the market (i.e., you're neither bullish or bearish), then you may want to use the advanced option when adding liquidity rather than the simple mode, i.e., Easy LP. 

How to Use Easy LP

To get started, head over to https://app.perp.com/, select 'Pools' and choose a market:

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We'll be providing liquidity to the BTC-USD pool to illustrate. 

Once you've selected a market, you'll see various statistics for the pool including the total APR (based on the expected fees you can earn) and the rewards APR (the liquidity mining rewards in PERP you can expect to receive).

Go to 'Add Liquidity':

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You'll then be able to provide liquidity using the Easy LP mode. As shown below, you'll have two options to choose from:

  • Bullish (you think the price will go down then go up)
  • Bearish (you think the price will go up then go down)

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The yellow dot in each of the visualizations shows the entry price of your liquidity position while the fluctuating line shows how you expect the price to move over time. For example, the option on the left shows the bullish option ("I think BTC price will... Go down then up") and the line chart shows a falling then rising price. 

The range in which you provide liquidity will be adjusted depending on your outlook of the market. For example, with the bullish mode, you'll be providing more liquidity to the downside in anticipation of the price falling and then rising. In contrast, the bearish mode puts more liquidity to the upside. 

The one-month price range is also shown for the asset you are providing liquidity for. Under "Set Price Range", you can adjust the price range with three options:

1. Narrow (20% price change),

2. Medium (40% price change),

3. Wide (60% price change). 

For example, with the bullish option, if you choose narrow then the price range will be set to 20% below the current market price. While if you choose the narrow option for the bearish mode, then the price range for your liquidity position will be set to 20% above the current market price. 

Remember, a tighter range is more likely to experience greater impermanent loss. The upside of a tighter range is that you can collect more of the fees generated by traders. A wider range is not as exposed to impermanent loss, but the fees collected will be relatively smaller. 

Once you've decided if you're bullish or bearish and you've set a price range, you can then enter how much liquidity you want to provide. Your liquidity position can be expressed in USD terms or in terms of leverage:

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On the right-hand side, you'll be able to see the overall risk as well as estimates of your earnings for this liquidity position in terms of USDC fees, PERP liquidity mining rewards and Pool Party OP rewards. Note that the estimated monthly returns may vary depending on the market's volatility. 

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Once you're happy with the settings of your liquidity position, adjust the slippage tolerance using the cog icon and click on 'Add Liquidity'. 

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If you want to provide liquidity without using the Easy LP mode, select 'Advanced' at the top of the pop-up screen:

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Examples

Below we illustrate some examples with some figures to explain exactly what is happening when you provide liquidity using the Easy LP mode. First, let's look at the bullish option. 

Bullish Mode

As explained above, when choosing the bullish mode, you are providing your liquidity to the downside in USD and a negligible amount in vBTC.

Say we provide $500 worth of liquidity between $21,000 and 20% below the current price ($16,800), then it will be swapped for 499.99 vUSD. A visual representation of your liquidity in this situation is displayed below:

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As the price falls and moves further away from $21,000, traders on Perp v2 that take a short position in the BTC market will use your vUSD as liquidity and you'll be swapping vUSD for vBTC. As shown below, once the price moves lower in bullish mode, your allocation toward the base asset (e.g., BTC in this case) increases. Remember that initially in the Easy LP bullish mode, 100% of your allocation will be towards USD. 

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Since you're bullish on BTC, you're effectively taking the opposite side of takers when they go short, so you'll be accumulating vBTC as the price declines. By the time BTC-USD approaches the lower bound of your liquidity position, i.e., $16,800, you'll have close to a 100% BTC position. 

As the price rises, you'll be scaling out of this long position in BTC until the price returns to the entry price, at which point your impermanent loss will be equal to zero and the liquidity position can then be closed so that you only exit with the fee revenue. 

As long as the price remains in your range, you'll earn fees. However, if the price falls below the lower bound, then you'll be in a 100% BTC position. If the price rises above the upper bound, then you'll be 100% in USD. In both cases, you will not earn fees until the price moves back into your range. 

Bearish Mode

Now let's say you are bearish on BTC and use the bearish mode. In this case, you are providing your liquidity to the upside in vBTC and a negligible amount in vUSD.

Say we provide $500 worth of liquidity between $21,000 and 20% above the current price ($25,200), then it will be swapped for 0.0238 vBTC. A visual representation of your liquidity in this situation is displayed below:

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As the price rises and moves further away from the $21,000 entry price, traders on Perp v2 that take a long position in the BTC market will use your vBTC liquidity and you'll be swapping vBTC for vUSD. Once the price moves higher in bearish mode, your allocation toward the quote asset (e.g., USD) increases. Remember that initially for the Easy LP bearish mode, 100% of your allocation will be towards the base asset (e.g., BTC). 

Since you're bearish on BTC, you're effectively taking the opposite side of takers when they go long, so you'll be accumulating vUSD as the price rises. By the time BTC-USD approaches the upper bound of your liquidity position, i.e., $25,200, you'll have close to a 100% USD position.

As the price falls, you'll be scaling out of this short position in BTC until the price returns to the entry price, at which point your impermanent loss will be equal to zero and the liquidity position can then be closed so that you only exit with the fee revenue. 

As long as the price remains in your range, you'll earn fees. However, if the price falls below the lower bound, then you'll be in a 100% BTC position. If the price rises above the upper bound, then you'll be 100% in USD. In both cases, you will not earn fees until the price moves back into your range.