How to Provide Liquidity in a Concentrated Liquidity Pool
Concentrated Liquidity Market Maker (CLMM) pools offer unique opportunities but come with risks like impermanent loss. Ensure you fully understand these risks before participating. Here's a step-by-step guide:
Step-by-Step Guide to Depositing Liquidity
Access the Liquidity Section
- Navigate to 'Liquidity' in the menu.
- Connect your wallet.
Select a Pool
- Search by token mint, pool address, or ticker.
- Click 'Deposit' on your chosen pool.
Set Your Price Range
- Adjust sliders on the graph.
- Manually enter min/max prices or use +/- buttons.
- Pro Tip: Toggle the price base token (e.g., USDC/SOL or SOL/USDC) in the top-right corner.
Enter Deposit Amounts
- Match the ratio shown (determined by your price range).
Create Position
- Review details and confirm.
Position NFT Issued
- Your liquidity position is represented as an NFT.
- ⚠️ Critical: Losing this NFT means losing your liquidity!
Managing Your Position
Track and adjust positions via 'Portfolio':
- Add/Remove Liquidity: Use +/- buttons in the position dropdown.
- Adjust Price Range: Requires creating a new position.
- Withdrawing Liquidity: Optionally keep positions open to save on reopening fees (e.g., 0.01 SOL Metaplex fee).
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Key Risks and Considerations
- Impermanent Loss: Higher in CLMM due to concentrated exposure.
- Position Management: Active monitoring recommended for volatile pairs.
- NFT Safeguarding: Store position NFTs securely.
FAQs
What is impermanent loss in CLMM pools?
Impermanent loss occurs when the price of your deposited tokens changes compared to when you deposited them, potentially reducing your overall value upon withdrawal.
Can I change the price range of an existing position?
No, you must create a new position with the updated range. Existing positions only allow liquidity additions/removals.
Why does my liquidity position mint an NFT?
NFTs represent ownership. They enable seamless tracking and management but must be preserved—losing the NFT forfeits the liquidity.
How do I minimize fees when adjusting positions?
Reuse open positions instead of creating new ones to avoid repeated Metaplex fees.
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This guide combines precision with actionable insights for CLMM participants. Always DYOR (Do Your Own Research) before committing funds.