Getting Started with Basic Liquidity Strategies
Last updated
Last updated
Introduction to Spot Liquidity Shapes
Strategy Breakdown: Concentrated, Wide, and Ultra Wide
Curve and Bid-Ask Strategy Explained
Understanding the Risks
Among the various liquidity provisioning methods, Spot stands out as the most accessible and widely used shape. It distributes your liquidity uniformly across a specified price range, making it versatile and relatively straightforward to manage. This uniform structure is especially effective for adapting to different asset types and market conditions, providing balanced exposure and predictable fee generation.
Let’s explore how Spot can be applied in different configurations to suit various goals, from high capital efficiency to low-maintenance setups.
This strategy is tailored for experienced liquidity providers who want to optimize capital efficiency by focusing all liquidity within a narrow price band—typically one to three bins. While this can lead to high fee generation, especially in stablecoin pairs, it also exposes providers to a greater risk of impermanent loss (IL) and requires frequent rebalancing to stay within range.
Ideal for:
Stablecoin-to-stablecoin pairs
Short-term, high-volume trading periods
Advanced users comfortable with risk
The Wide configuration spreads liquidity over a broader range (roughly 20 to 50 bins), reducing the risk of being priced out of the market and lessening the need for frequent adjustments. It’s a great choice for those newer to the Saros DLMM system or anyone who prefers checking in on their position every few days rather than daily.
Key benefits:
Captures volatility-driven fees
Less rebalancing required
Suitable for more volatile assets
The Ultra Wide shape is designed for minimal maintenance, making it ideal for users who prefer a passive approach. By distributing liquidity across hundreds of bins, it ensures continuous exposure regardless of price movement. This strategy mimics the traditional x*y=k model, familiar from legacy AMMs.
Notable characteristics:
Very low upkeep
Best for long-term, low-effort strategies
Liquidity is deployed in multiple batches, each through a separate transaction.
For those seeking a balance between tight concentration and wide coverage, the Curve shape is a solid choice. It focuses most of your liquidity around the current price while still spreading some to neighboring bins. This structure allows liquidity providers to benefit from price fluctuations without putting all their capital at immediate risk.
Best suited for:
Stable pairs with soft pegs
Key support/resistance levels in volatile pairs
Users who don’t mind rebalancing but want diversified exposure
The Bid-Ask shape is the most advanced among the basic strategies. It’s built to thrive in volatile markets by capturing movements around a target price. This structure splits liquidity across bid and ask levels to optimize for fee generation when prices swing within your chosen range.
However, to remain effective, this strategy demands consistent monitoring and rebalancing. If the price exits your defined range or volatility dries up, adjustments are necessary.
Choose this if you:
Are experienced and comfortable managing complexity
Want to capture profit from consistent market fluctuations
Understand the trade-offs between fee potential and risk
Participating in liquidity provision—regardless of strategy—comes with inherent risks. These include, but are not limited to:
Impermanent Loss (IL) when asset prices diverge
Smart contract vulnerabilities
Systemic or platform-related failures
Market volatility and liquidity crunches
Regulatory shifts
Human or operational errors
There are no guarantees in DeFi, and you should only provide liquidity with capital you can afford to lose. If you're unsure, always seek advice from a qualified financial professional.
