How to Make an 11+% Return in 1.5 Months on PulseChain

This address made a return of more than 11% in just 47 days on PulseChain.

And the best part is that they managed to do it while maintaining price exposure to PLS.

Here’s how they pulled it off.

This article is part of the Chain Reactions series — expert opinions for everything Blockchain and Crypto.

Making Money by Liquidity Providing

Our success story made their sizable 11% return by using one of the DeFi earning avenues enhanced by the Liquid Loans protocol: liquidity providing.

Liquidity providing (or “yield farming”) is a way of earning passive income by supporting a trading pair.

While liquidity providing is actually done through external liquidity pools like PulseX, tokens native to LL like LOAN and USDL are particularly attractive choices for providers.

This is thanks to the comparatively high payout rates of providing liquidity for these digital assets.

How Much Did They Deposit in the Liquidity Pool?

The wallet address that we’re talking about made their money by depositing 13,500 USDL and 104.8 million PLS in the USDL/PLS pair on PulseX v2. 

They did this on January 30th, 2024, at a rate of $0.000128.

This meant that the total value of their LP position was around $27,000 USD.

Whenever users want to swap between USDL for PLS through this same liquidity pool on PulseX, they pay 0.22% of their USDL or PLS to the Liquidity Provider.

By March 17th, 2024, the price of PLS was back at $0.000128.

But from January 30th to March 17th, they earned fees every time someone traded.

This brought their position up to 15,090 USDL and 117.5 million PLS, adding up to a combined value of over $30,000 USD!

Getting Paid to Support DeFi

Of course, supporting the USDL:PLS pair through liquidity providing is about more than just earning a profit through passive yield.

It also means getting to support the true DeFi stablecoin that the PulseChain ecosystem needs: USDL.

USDL is fully-backed and overcollateralized by PLS. 

It’s a stablecoin generated by Liquid Loans, which is a DeFi protocol with no admin keys and a decentralized oracle service. 

When you provide liquidity for USDL, you enable other users to transact value in a way that stays true to the first principles of crypto and blockchain.

Yield Farming While Maintaining Price Exposure to PLS

Another core feature of liquidity providing as a means to earn is that you get to hold PLS as part of your position.

Since PLS is an appreciating asset by definition, it makes sense to want to hold onto it in case the asset’s price rises.

This can make liquidity providing an effective way to earn while still being able to catch any potential PLS price pumps.

Still, it’s important to note that liquidity providing for a pair of tokens can put you at risk of encountering what’s known as an impermanent loss. 

In the case of the USDL/PLS pair, if the price of PLS rises, the value of your pool will also rise. 

However, your PLS will increasingly be converted into USDL, limiting your exposure to PLS.

If you’re somebody who wants to have a large portion of your holdings in PLS, consider only using a small amount to provide liquidity. 

This would also free you up to make use of one of the other six ways to make money with Liquid Loans at the same time.

Articles in the “Chain Reactions” series are fast-paced DeFi opinion pieces. They do not necessarily reflect the view of LiquidLoans.io, nor is any of the content hosted on this website a substitute for financial advice.