Is there a strategy for investing in cryptocurrencies? (7) - Is liquidity mining really profitable?

First of all, I don't feel very good about the translation of liquidity mining.

In fact, it should be said that the reward obtained by providing the liquidity of the currency is nothing to do with mining at all. And I believe that those who have played it understand how it works, so I will review it again.

Binance’s explanation is:

Therefore, in order to make enough buyers and sellers, the exchange attracts people who have coins to put cryptocurrencies in the trading pool first, so that those who buy coins can get coins and those who sell coins can get USDT, and the "liquidity" is completed. ". In order to repay those who put their coins in the trading pool, the exchange will give the transaction fee to some of those who are willing to put it in the trading pool. This fee is usually divided into cryptocurrencies , so the procedures for getting it Those who pay the fee are called "liquid mining" as if they have dug into the mine. In essence, the method of exchanging computing power for cryptocurrency is different.

In this way, everyone will understand that it is like helping people on the roadside to find renewals. If these coins are not used very much, they will often be charged and earned back when they are placed in these pools.

It seems like a must-win, but is it true?

First of all, in terms of risk, excluding the unpredictable risks of rogues or hackers, it should be calculated that the currency price cannot catch up with the return of APY.

The following chart is based on the return calculation method, how much APY will take how much time to double the return, if the currency price is less than half of the USD, basically there is no profit.

For example, one of the coins, $HCT, can be more than 400% a year, but is there any profit?

In the picture above, the price of the currency fell by more than 90% in the first half of the year. I don't know in the future, but even if it is 400%, you will lose.

Another example is $CAKE, it is APY 60%

Playing at nearly $7, if it was at least 50% less from May to September last year, it's just a draw.

Of course, some Pool returns plus other coins will be more complicated, but they are all inseparable from this view. What Pool gives you will only be based on the investment ratio.

I have been hit many times by myself, and found that the only ones that can make a steady profit can only be regarded as their own airdrop, and then LP .

The airdrop that took $STARS before and put it on STARS/OSMO, plus $OSMO and $STARS on top of zero cost, will be rewarded, and the price will not fall.

Looking at it today, of course, it is profitable, but it is difficult to guarantee that it will fall into shit after half a year. But it is necessary to see whether the previous currency situation has been falling for a long time.