Discover how entering liquidity pools at the right time can boost your returns! In this video, we explore critical mass for profitability, risks of impermanent loss, and key insights from industry leaders on sustainable investing in AMMs and liquidity pools.
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00:00The earlier you are into a liquidity pool or an AMM, the more money you're going to make.
00:05So similar to like an ICO or a meme coin or any of those things, the less liquidity when you get in, the better if it's going to be adopted and grow to scale long term.
00:14Now, you can't rug everybody, right? So you need to get things to critical mass before you can pull profits on stuff, especially if you're the majority of who funded the pool to begin with.
00:25I think that critical mass, based on my conversations with him, is somewhere between 50 and 100 million in liquidity in a liquidity pool before you could start pulling your returns out of that pool.
00:38And in the form of LP tokens, if it's an AMM or liquidity pool tokens, LP tokens, if it's liquidity pool, liquidity pools are going to be live on the XRPO for at least another four or five months is probably my guess.
00:49When I talked to David Schwartz last year, consensus, he said May, June is probably when it would come up for vote this year.
00:56And he was right on point, you know, when I asked him the year before about the AMMs, when they would come up for vote, I said, you know, when do you think those will happen?
01:03He said December. And they did. It showed up in December, but they didn't get approved until March of 2024, which was very frustrating.
01:10So again, that just shows the decentralized nature of the network and people voting on things.
01:14And if there's actually a governance mechanism, like it's good, it's good for the overall adoption of the network, but it's just frustrating for people that want to see progression.
01:22So, you know, I think that'll come up for vote in May, June, but it might not get approved till August or September, potentially for the liquidity pools.
01:31And that's definitely something we're watching with digital wealth partners and how we can be able to generate returns and how those mechanisms are going to work.
01:37And again, that's why I'm talking to, you know, the person that runs the largest AMM on the XRPL to glean knowledge because he's already done it.
01:46Right. I don't know what the current liquidity on that in that pool is, but I think it's over 10 million.
01:50So the early you are, the better. And but you're going to have to wait in order to be able to make profits on it.
01:55This is what I would say. And you're going to want to make sure you get in a pool that's going to be sustainable over the long term.
02:00The parties aren't going to remove their stuff and rug everybody, you know, things issued like XRP versus ROUSD, that liquidity pool.
02:08And then you're also, you know, you're going to have an impermanent loss for your XRP that you put in the pool.
02:12If it goes way up in value after you put it in the pool, half of that value is not ever going to go because it's in a stable point.
02:18So just be aware of that. You're likely going to have impermanent loss.
02:21And if you try to do a one sided pool, that's a whole nother problem.
02:24So work with professionals probably be my recommendation.
02:27And if you do know what you're doing, get in early on something that you think has longevity and the lower the liquidity there is when you get in, the more upside you go.