LP Strategies
In Cetus DLMM, users can allocate custom amounts of liquidity to different bins to create different shapes of liquidity curves, thereby executing various LP strategies. LPs can select different strategies to match their custom needs, risk tolerance and market outlook. Each strategy has its own characteristics and is designed to cater to various market conditions. The following are the common strategies used in DLMM:
Spot Strategy
Spot strategy in DLMM allocates liquidity evenly across the selected price bins. It’s straightforward and adaptable, which can be customized for all kinds of market conditions. It works much like setting a CLMM price range.
By setting different number of bins of a position, liquidity can be distributed into different price widths, resulting in distinct risk-return profile.
Spot
Concentrated
Liquidity is allocated in an extremely narrow range (usually in 1-3 bins).
Maximizes fee income if the price stays within the selected range; highly capital-efficient.
Exposure to impermanent loss is higher if the price moves outside the range; requires active monitoring.
Suitable for stable trading pairs or LPs confident in short-term price stability or seeking high fee yield in a narrow price window.
Spot
Spread
Liquidity is distributed across several bins covering a moderate range (usually in 10-30 bins).
Balances capital efficiency and risk exposure; provides some protection against moderate price swings
IL risk is still high; daily monitoring is necessary
Ideal for pairs with lower volatility or those with a relatively limited fluctuation range in a certain period
Spot
Wide
Liquidity is spread across a broad range of bins, covering extreme price movements (usually more than 60 bins).
Reduce risk of being fully out of range; IL risk is relatively controllable.
Liquidity efficiency is diluted
Suits volatile pairs; LPs who want to cover most of price swings of a pool or LPs who don't have time to monitor positions very closely
Curve Strategy
Liquidity is concentrated around a defined price range, with the highest density in the middle and tapering off toward the edges.
High capital efficiency. Reduced slippage for trades near the price center.
Liquidity is limited outside the main range; may require active adjustment in volatile markets
Stablecoin pairs, low-volatility assets, or markets where price tends to stay near a predictable value
Bid-Ask Strategy
Liquidity is distributed in an inverse curve, with more concentration at the edges of a price range and less near the current price.
Effective for capturing volatility at price extremes.
Potentially higher slippage for mid-range trades; may require careful monitoring to ensure bins are aligned with market conditions
Assets with volatile price movements; DCA-style strategies or tactical rebalancing around key price thresholds
Advanced Strategies
DCA (Dollar-Cost Averaging): LPs can apply the Bid-Ask strategy in a single-sided manner to gradually enter or exit positions over time.
Buy Wall/Sell Wall: LPs can set up liquidity on both sides (or either side) of the market, prevent the asset price from falling below or soaring over a certain price point.
Laddering Trading: Liquidity is deployed across multiple price levels in a stepwise fashion, allowing gradual accumulation or exit of a position.
Peg Divergence Capture: Targets temporary deviations of stable pairs from their intended peg. By allocating liquidity just above and below the peg, LPs can profit from fees as the market moves toward rebalancing.
And more
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