How to Make PASSIVE INCOME as a Liquidity Provider (Earn on Crypto)
https://www.youtube.com/watch?v=XOHKwe3NHQo
Transcript:
Today I’ll walk you through exactly how to make passive income on your cryptocurrency assets by utilizing Metrix Finance, the best liquidity pooling software out there. I’m Jake Call, the founder of Metrix Finance, and I have one mission in mind with this software tool, and that’s to create the best possible software for liquidity pooling so that way I can have good data for my own personal investments as well as my clients that I work one-on-one with.
And of course, that just comes with opening it up to the public for you guys. But I want to go ahead and talk about the basics of what a liquidity pool actually is and just give a high-level overview. So first things first, in this model, we have three different parties.
Number one is an automated market maker or a liquidity pool, basically. The other one is going to be a liquidity provider, which actually supplies the capital into the liquidity pool. Now, remember, liquidity providers have to put up two different assets, asset one and asset two. So if they’re providing liquidity for something like ETH as well as Bitcoin, well, then guess what? They’re going to be putting up both those assets in the liquidity pool and that means that the trader will be able to come along and trade through this ETH and wrapped Bitcoin liquidity pool so if the trader wants to accumulate wrapped Bitcoin they’re going to go
ahead and put ETH in the liquidity pool but they’re going to take an equal dollar amount of wrapped Bitcoin out of the liquidity pool now in return they’re going to pay a small portion of this eath over to the liquidity providers for this pool based on their proportion of the pool the other option is vice versa if they want to go ahead and trade let’s just say wrapped bitcoin for eath because maybe they are more bullish on e well then guess what they’re going to put wrapped bitcoin in this liquidity pool and they’re going to take eath out of this
liquidity pool and there’s going to be a small wrap bitcoin fee that goes to liquidity providers among this pool and of course there’s concentrated liquidity which is what we’re going to primarily be talking about today where essentially you’re selecting a range for your liquidity pool to be way more capital efficient for example let’s just say this chart right here zero dollars to infinity is the liquidity and you use a range of maybe 1 000 to 2 000 right You’re putting more per price point than if you were
to do the same exact thing, but have full range liquidity, because then you’re not putting as much liquidity on each individual price point, and you have liquidity on prices that aren’t going to be touched for a very, very long time or are never going to be touched, basically. Now, let’s dive into actually identifying these different liquidity pools and going through simulation and building out our portfolio, basically.
So the first page that we’re going to start on is the Metrix Finance Discover page. And once we’re on the Discover page, we’re going to start on is the metrics finance discover page and once we’re on the discover page we’re going to select the exchanges as well as networks that we want to provide liquidity on I personally like to look at uniswap v3 pancake swap as well as orca and then I’m going to look at the ethereum Network Arbitrum Network Optimism Network Polygon Network base Network and B and B chain basically and I’m also going to
include Solana because I do have orca selected these are kind of like my preferred networks obviously metrics Finance does support other networks like the Polygon ZK EVM, Manta Pacific, Avalanche CELO, stuff like that. But I personally don’t really care too much about liquidity on those networks. Now, off the bat, you’re going to see that we have over 1,500 pools.
But we’re going to go ahead and put in some filters to make sure that we can narrow these results down so we only identify opportunities that we truly want to invest into. The first thing that we’re going to do is select a TVL that is higher than $1 million. And the reason why we are selecting a TVL higher than $1 million is because we want to look at stuff that’s more blue chip that isn’t going to have as much slippage whenever we invest into it.
It’s not going to have as much price impact when we make trades to get into these liquidity pools. Now, ideally, you should also be looking for assets that you truly believe in that you’re already holding in your cryptocurrency portfolio. So maybe that’s ETH, Bitcoin, Polygon, and some other assets.
What we can do is we could go over to this pool section and we can type in this include section some of those assets like ETH, BTC, MATIC, LINK, RENDER, SOLANA, TAU, GRT, and any other asset that we truly believe in. I’m just going to start with those ones, for example. And off the bat, that’s going to narrow me down to roughly 564 different pools.
Now, one thing that I want to go and mention is if we do take out ETH, we’re going to have significantly lower amount of pools. As you can see, we go from 564 to now 67. The reason why is because this is showing us different pools that include ETH as well as other assets, basically. So we’ll see stuff like ETH to WIF over here and ETH to MAGA and stuff like that. And already off the bat, a lot of these assets are already paired with ETH.
So I’m just going to take ETH off this list. So that way I can identify truly good opportunities that I actually want to deploy my capital into and invest into. And I’m going to put this fees APR higher than 10% just so I can identify a couple less opportunities like 45, for example. And it’s very, very easy to sort through them.
And from here, this is where I start my analysis. And this is where I start to identify the different pools and start to favorite things to see which ones I actually want to invest into. And by the way, we are going to be using a couple metrics pro features in here.
And if you guys don’t have metrics pro, we are currently running a discount where you can get four months for free on our yearly plan with code year metrics pro is $40 per month or $400 per year. And if you use code year, you’re basically getting $80 off of this price. So it comes out to $320, which is a fraction of what we are going to make on a monthly basis, depending on how much capital you actually deploy into your portfolio.
But let’s dive in further and actually identify these different opportunities. Now, me personally, I would not mind deploying into something like RappBitcoin to USDC right now, mainly because the market is chopping sideways. When the market’s chopping sideways, it’s okay to have crypto to stablecoin liquidity pools.
But when the market’s going up, well, guess what? Wrapped Bitcoin is going to get sold into USDC because wrapped Bitcoin is going up. Whereas when the market’s going down, well, the opposite is going to happen. USDC is going to be used to buy wrapped Bitcoin on the way down. So we might want to buy wrapped Bitcoin on the way down, or we might want to sell wrapped Bitcoin on the way up.
Well, then we could do that in those markets, but you probably want to sell it at a much higher price than the range that we are going to end up choosing for our liquidity pool, which is why I think it’s really, really good to be in stuff like wrapped Bitcoin to USDC right now while the market’s going sideways or give or take a couple thousand dollars per Bitcoin up or down.
And then when it comes towards the bull market, provide something like wrapped Bitcoin to wrapped ETH or wrapped Matic to wrapped Bitcoin or something like that. But I’m going to go ahead and favorite this for now. I’m also going to go ahead and favorite ETH to LINK because this is one that I’m actually personally deployed into right now, but it’s also two assets I believe in and has $67 million of TVL.
Now you’ll notice that we have USDC wrapped Bitcoin up here and USDT wrapped Bitcoin down here and this one’s doing slightly higher percent. We’re not going to focus on that right now, mainly because this one has higher TVL. We’ll identify the parameters on this RAT Bitcoin to USDC since it has higher TVL, but then later on we’ll run a little search just to make sure that we are getting the best return out of RAT Bitcoin to USDC across all networks, but also across different derivatives of the US dollar like RAT Bitcoin to USDT, RAT Bitcoin to DAI, other assets like that, and other cryptocurrency stablecoins. I also wouldn’t mind having something like BTCB to ETH, which is basically Bitcoin B or Bitcoin Binance version to ETH basically. And that’s
basically Bitcoin that’s on the Binance Smart Chain Network or BNB chain. So I’m going to go ahead and favorite that as well because that’s one that I would personally want to include in my portfolio. And 38% on a pair like that is pretty good considering these are all blue chip assets. There’s also ETH Render, which looks to be killing it right now at 115% APR.
So I’m just going to go down and favorite a couple of these. Now, remember, you should be looking for these different parameters, and you should be looking for stuff that actually has a decent return. Anywhere from 30% to 80% is pretty solid. Anything higher than that is really, really good. And a lot of us think, hey, we can earn 1% per day, which we can, but that’s going to be a much, much more short-term strategy.
And ultimately, we’re going to end up having to constantly filter through brand new assets it’s not the strategy of earning income on your already existing assets one percent a day is the strategy of going out and just trying to make one percent per day and kind of sacrificing long-term growth and stuff like that just for the one percent per day yield or whatever you end up getting so that’s just something i want to go ahead and point out there so make sure to look for these different pools for assets that you believe in you can filter through
these different pages you can also look for stuff that has a specific volume to TVL ratio or feed a TVL ratio. One thing I like to do is kind of look at the average across here, just see what’s there. Like you could see this one’s 0.07%. This one’s 0.08%. This one over here is 0.02%.
A lot of them seem to be above 0.02%. So we could go over here to feed to TVL and do higher than 0.02% basically. And that knocks off some pools and shows us about 35 different opportunities, which does make identifying easier. But I have four different pools here. So I want to go ahead and show you guys a couple different examples of how you can go in and start to simulate these.
So first things first, we’re just going to pull up the simulation page. And from here, what we’re going to do is we’re going to start to identify the range that we want to use for this pool. One thing that I will mention, that’s just a word of advice and a little tip sometimes you’ll see usdc to wrap bitcoin and you’ll want to click this little button and the reason why is because you might be greeted with these crazy insane decimals like point zero zero zero blah blah blah blah blah basically very very annoying to try to actually identify your range so what i would do is i would toggle this pair until i see full numbers
so this one is a full number which is a good example and i would look at how many usdc’s equal one wrap bitcoin as opposed to how many wrap bitcoins equal one USDC. It’s just not logical to look at it that way. And from here, I want to look at this correlation chart to the right and start to adjust my min and max price.
I usually start by having my max price at the 30 day high, mainly because I have an investment horizon of roughly two weeks per liquidity pool, which means if I have a two week horizon per liquidity pool, I want to double that and have that as my calculation range. So 30 days will be fine.
I could even go to 28 days if I really want to so I’ll do 28 days and then my min price I’ll put at the bottom and from here I can start to determine what I need to do and the first logical thing That comes to my mind is hey this pink line which represents the current price is awfully close to this top green line So what I need to do is I need to up the green line because I can’t move the pink line because that’s the current price.
I could if I want to, but it’s not logical to do that because when we go and actually deploy, we can’t move the current price. The current price is going to move how the current price is going to move. We just want to up that max price until we get some buffer room. And what I’m looking for is how much can this price jump in just the time span of a couple days.
As you can see over here, we went from roughly 66,000 all the way up to roughly 71,000 in the time span of basically a day and a half. So I would wanna factor that in. I wanna say, okay, from current price, we can move up that much. So I’d probably do like 76,000 right over here. That’s plus 9%. And then from there, I can start to look at my deposit amounts. Now, if I’m bullish right now or slightly bullish, I probably wanna have about 60% wrapped Bitcoin, whereas if I’m slightly bearish, I want to have about 60% USDC.
And if I don’t really care about the market too much, and maybe I just want to go sideways, earn fees, earn income, in this scenario, since we have the crypto stablecoin, we could do about 50-50 of each asset, basically. That’s assuming both assets are going to perform similar, which means that Bitcoin is basically going to chop sideways and USDC is going to stay the same.
And this seems like a pretty solid range to me. It keeps us in range for the past nearly 28 days. And if we look at 14 days, we are well in range as well. So what I’m going to do is I’m going to zoom back out to 30 days. I’m going to look at the volume history and say, okay, this volume has drastically gone down.
And what Metrix Finance does is it factors every single day that’s shown on this volume history chart, which means we’re factoring the days where we had really high volume, but more recently, we do not have that high volume anymore. So it’s not logical to factor in those days. If we were to use a two day calculation range, we go down to 2.6% APR, not good at all.
So that’s where identifying different opportunities for our Bitcoin would come into play. So we’ll head back over to the simulate page, I’m just going to open it in a new tab and go over to the pair function. And once we are on the pair function, we’re going to want to select the same exact exchanges and networks that we would use over on Discover. So that’s going to be Uniswap, PancakeSwap, as well as Orca for me.
And I’m also going to select all these different networks down here as well. And keep in mind, it’s loading this data in real time. So as soon as it loads, which typically takes about 10 seconds or so, we’re going to go ahead and enter in the asset, which is RappBitcoin, as well as USDC. Now what pair is going to do is it’s going to show us all the RappBitcoin to USDC opportunities across a exchange that we selected coin as well as usdc now what pair is going to do is it’s going to show us all the rapid coin usdc opportunities across a exchange that we selected as well as the networks
that we selected which means that we’re going to be looking at a load of different opportunities and it pulls all this data from coin gecko directly we’ll want to enter our deposit amount just so we get a realistic idea on how much money we can make on a daily basis so i’m just going to put 10 000 i’ve already entered in all this information right and the next thing I’m going to do is check this little similar assets button, because this is already showing me all the different rapid Quindy USDC opportunities on
these networks and exchanges with different returns. Like as you can see, it’s 112% over here, 22% over here, so on and so forth, basically. But now I want to look at stuff like rapid Quindy USDT. So I’ll just hit similar assets. Now it’ll show me all the different opportunities using my min and max price as well as my deposit amount.
And if we want to, we can adjust that calculation range. And just like that, now we see rapid queen to USDT at the very, very top. And then we’re also going to see all those different opportunities below it. So I’m personally going to go ahead and pull up this rapid queen to USDC one over here on Orca, about 50% APR, and there’s about $600,000 of TV 000 of tbl nothing too crazy not not super huge we’ll open that up and i’m also going to open up this usdt one and then this one over here on the ethereum network on 0.3 here really looking for the top ones and then from there that’s where i’m
going to go ahead and actually enter in my range once again we’ll do our do our 63 000 to 76 000 we’re also going to go ahead and look at the volume history. This looks a lot, lot more consistent than what we were seeing over on that first one that we were looking at, which means probably want to use like three days of volume history. So we’ll do calculation range of three days, $10,000. It’s about a 30% APR. Do the same thing over on USDT.
Just copy and paste that information. 63,000 to 76,000. Scroll down. You can see volumes down pretty bad on this one. So we’re going to use three days still, but I don’t think it’s going to be nearly as high as we’re anticipating. Showing 140% APR. Once we use three days, it shows about 8% APR.
We throw in 10K, it’s still about 8%. I’m just going to close out of this one. So far, it’s best to be on the Solana network for this pair. And then we could look over here at RappiCoin to USDC as well. This one’s same thing, Ethereum network, it’s just a different fee tier. And if we go ahead over here at RappiCoin to USDC as well. This one’s same thing. Ethereum network is just a different fee tier.
And if we go ahead and adjust our range to 63,000 to 76,000, which is what we already found, and then we adjust our calculation range, we want to look at this volume history. You can see yet again, this is down a good amount. And this is the first one that we looked at. So maybe we want to go ahead and look at the 0.05% here.
Because recently, since there isn’t as much volatility, it might be performing better on the lower fee tier, even though we’re charging lower fees. Since there’s a better route for the traders, there’s going to be more volume there, which is going to cause us to get better returns. So if we pull up RapidCoin to USDC over here, you could pull up that 0.
05% tier. The first thing I’m going to take a look at once everything loads up is volume. You could see that the 0.3% fee tiers loss is the 0.05 tiers gain because a lot of volume came in right over here so we’re just going to enter in our parameters over here we’re going to toggle that pair and type in 63 000 76 000 we use a calculation range of three days just like that we’re showing 18 return that’s good but that’s not nearly as good as what we’re getting over on orca which is about 30 apr 30 apr and rapid coin to usdc is pretty solid and i would
say if you really want to you can narrow this range down just a little bit if you really want to have a tight range i would just consider watching it more often you could get higher than 30 but basically once we like what we see and we’ve kind of decided our allocation amount and everything like that we’re just going to go ahead and hit save to portfolio then we can go over to strategize and that’s going to show all of our different opportunities that we saved to the portfolio basically for building out a portfolio and once this loads up you can see I have a ton of other plays in here about
$130,000 allocation doing 140 percent APR overall That’s 500 bucks a day off of a hundred and thirty K But basically you would go through and you would do this for all the pools that you favorited over on the discover page and you Would just add them to your portfolio as you start to find ones you like and some of them them you might say, oh, this return sucks for the risk that I’m taking on.
And you just wouldn’t hop into that pool because not every pool makes sense.
