Adding and Removing Liquidity
Deploy Liquidity within a custom price range on HydraDEX
On HydraDEX, you can add and concentrate your liquidity within a custom price range, or throughout the entire price range from 0 to infinity. HydraDEX is also accessible using the Hydra Mobile App. You can bridge in assets from the Ethereum Blockchain using the native Hydra Bridge on a desktop.
What is a Liquidity pool?
A liquidity pool is a pair of tokens locked in a smart contract and is used for trades on a Decentralized Exchange or DEX like HydraDEX. These tokens in the pool are provided by Liquidity Providers (LP's), who receive LP Tokens (V2 Pools) or an LP NFT (V3 pools) as proof of liquidity.
The LP's earn fees from trades that occur on the pools they have their liquidity in. For some pools, there are also attractive Liquidity Mining incentives provided to the Liquidity Providers as a reward for supplying liquidity.
Hydra Mobile App
How to add liquidity on HydraDEX V3 using the Hydra Mobile App
After entering your wallet, click on the blue "Stake" button.
From the bottom menu click on "Pool" to open the Pools page.
Click on "New Position" and and from the dropdown, select the token pair you wish to add liquidity for (For example LYDRA and USDC). You can visit the info page by clicking on "Charts" in the bottom menu, to view information like TVL, token price, trading volume, fee tier etc... on existing pools.
Now select the Fee tier for the pool. There are 4 available fee tiers 0.01%, 0.05%, 0.3%, 1%. You can view existing pool fee tiers on the info page and choose the appropriate one. You may also want to consider, which fee tiers have active liquidity mining campaigns running. If the pool already exists, then your liquidity position will be added to the pool. If the pool does not exist, your liquidity position will create a new pool at the selected fee tier.
Select the price range for which you would like to provide liquidity. You can enter a specific concentrated range or the full price range from 0 to infinity, although this might not be very capital efficient. You can also drag the red and blue sliders to select a price range. If you want to deploy liquidity on the full price range, click on "Full Range" If the market price moves out of your set range, then your liquidity position will end up fully converted into one of the two assets and stop earning fees. To elaborate with an example: If you set a price range of $1 — $5 for Hydra/USDC and Hydra price falls to 0.9, then your liquidity position balance will be entirely in Hydra. Conversely, if Hydra appreciates to $6, then your liquidity position balance will be entirely in USDC. Additionally, while the price remains outside of your price range, your position will be "inactive". This means your position will not earn fees until the market price comes back in range. Note: When selecting a price range, the price will round to the nearest tick.
Enter the amount of tokens you want to deposit into the liquidity pool, or select “Max” for the maximum amount of tokens.
Click on "Approve" which basically allows the DEX to use the tokens for providing liquidity and wait for a few seconds. You may need to approve for both tokens. Please note, this transaction will cost some network fees.
Next you need to click on "Preview" to review the liquidity position details, and then click on "Add". Please note, this transaction will cost some network fees.
Once the transaction is confirmed, you will be able to see your liquidity position on the Pool tab.
Check out the Liquidity Mining Campaigns for certain pairs at select fee tiers ✨
How to remove liquidity from HydraDEX V3 using the Hydra Mobile App
After entering your wallet, click on the blue "Stake" button.
From the bottom menu click on "Pool" to open the Pools page.
Select the Liquidity Pool you would like to remove liquidity from. This will display your liquidity in that pool and the proportions of both assets.
Click on "Remove Liquidity" to review the details of your liquidity position
Drag the slider or select a percentage of liquidity that you would like to remove
Selecting 100% also claims the collected fees you have earned. Note: if your liquidity position includes HYDRA, you will see the option to "Remove as wHydra" Selecting this means you receive WHYDRA in place of HYDRA when removing liquidity, which can be later converted to Hydra at a 1:1 ratio.
Click on "Remove" to view the final summary and then click on "Remove" again. Please note, this transaction will cost some network fees.
Once the transaction is confirmed, the assets are deposited to your address
HydraDEX on Web Browser
How to add liquidity on HydraDEX V3 using Google Chrome
Login to your Hydra Browser Extension and choose the address that you will use for accessing the HydraDEX.
Visit https://hydradex.org/ and click on the "Pool" tab from the top menu to open the Pools page
Click on "New Position" and and from the dropdown, select the token pair you wish to add liquidity for (For example LYDRA and USDC). You can visit the info site at https://info.hydradex.org/ to view information like TVL, token price, trading volume, fee tier etc... on existing pools.
Now select the Fee tier for the pool. There are 4 available fee tiers 0.01%, 0.05%, 0.3%, 1%. You can view existing pool fee tiers on the info page and choose the appropriate one. You may also want to consider, which fee tiers have active liquidity mining campaigns running. If the pool already exists, then your liquidity position will be added to the pool. If the pool does not exist, your liquidity position will create a new pool at the selected fee tier.
Select the price range for which you would like to provide liquidity. You can enter a specific concentrated range or the full price range from 0 to infinity, although this might not be very capital efficient. You can also drag the red and blue sliders to select a price range. If you want to deploy liquidity on the full price range, click on "Full Range" If the market price moves out of your set range, then your liquidity position will end up fully converted into one of the two assets and stop earning fees. To elaborate with an example: If you set a price range of $1 — $5 for Hydra/USDC and Hydra price falls to 0.9, then your liquidity position balance will be entirely in Hydra. Conversely, if Hydra appreciates to $6, then your liquidity position balance will be entirely in USDC. Additionally, while the price remains outside of your price range, your position will be "inactive". This means your position will not earn fees until the market price comes back in range. Note: When selecting a price range, the price will round to the nearest tick.
Enter the amount of tokens you want to deposit into the liquidity pool, or select “Max” for the maximum amount of tokens.
Click on "Approve" which basically allows the DEX to use the tokens for providing liquidity and wait for a few seconds. You may need to approve for both tokens. Please note, this transaction will cost some network fees.
Next you need to click on "Preview" to review the liquidity position details, and then click on "Add". Please note, this transaction will cost some network fees.
Once the transaction is confirmed, you will be able to see your liquidity position on the Pool tab.
Check out the Liquidity Mining Campaigns for certain pairs at select fee tiers ✨
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Useful Information
What is Impermanent Loss?
Impermanent Loss takes place when the relative value (to each other) of your deposited tokens changes compared to when you entered the liquidity pool. The higher the relative change in price of the tokens, the higher the effect of impermanent loss.
Example: Myra provides 500 LYDRA and 200 USDC to a LYDRA / USDC Liquidity Pool. And the value of 500 LYDRA is $200 (1 LYDRA= $0.4). So in total, Myra has provided liquidity worth $400. Let's say the price of LYDRA increases to $4. Now due to the nature of automated market making (AMM) in DEX's, the ratio of the provided liquidity has changed as the result of the trades that caused the price to increase. Now when Myra decides to withdraw her liquidity from the pool at the increased LYDRA price of $4, the balance has turned into 200 LYDRA and 800 USDC; and that is worth $1600! These profit's are quite good as she put in $400 worth of liquidity and got $1600! but wait! What would be her profit, if she would have just HODL'ed those tokens? The combined value would have been $2200 now. Myra would have been better off HODL'ing the tokens instead of depositing into the liquidity pool. This is what is called impermanent loss.
Liquidity mining campaigns help a lot towards negating the impact from Impermanent loss. Check out the Liquidity mining campaigns available on the HydraDEX.
In the above example, we assumed that Myra has provided liquidity across the full price range and we have not considered income from Fees and Liquidity Mining rewards.
Price Range Selection
Your position only earns fees during periods where the market price is within the price range you set. For example: If your price range for HYDRA/USDC is set to $1 — $4 and the price of HYDRA is at $5, you won’t receive any fees until the market price moves back into your range. So it is important to manage your liquidity positions accordingly. You can always remove the liquidity from your current position and add a new position with a more efficient price range.
Tighter Ranges gets you higher fees
With tighter ranges you earn a higher proportion of the fees and also a higher share of the Liquidity Mining budget of the pool; however, It also acts as a form of leverage on impermanent loss, since the capital concentration of your assets is amplified. If your range is breached by the price, you will end up owning 100% of the underperforming asset.
Example: If you set a price range of $1 — $5 for Hydra/USDC and Hydra price falls to 0.9, then your liquidity position balance will be entirely converted into Hydra. Conversely, if Hydra appreciates to $6, then your liquidity position balance will be entirely converted into USDC. Additionally, while the price remains outside of your price range, your position will be "inactive". This means your position will not earn fees until the market price comes back into range. As mentioned earlier, you can remove the liquidity from your current position and add a new position selecting a more preferred price range.
If you have any questions, please do no hesitate to contact an Admin on the official Telegram group https://t.me/hydrachain
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