There are many ways to invest in the Hive ecosystem but one very good way that I liked and that I am also doing practically is investing in a liquidity pool. I will explain it in detail but first it is important to share that liquidity pool investment includes both profit and loss. You must be ready for both of these.

What is LP and for which investors is this pool best? When you make a pair of Hive tokens and invest in it, the liquidity that you provide is called an LP. In simple words, when you provide liqudity for traders so that they do easily do trade then this process is known as liquidity pool.

For example I want to make a pair of #HIVE and #COLONY tokens and invest in an LP. Now, whenever traders trade in this pair we keep getting profit on every transaction because we have provided liquidity. After every transaction we will get profit shares according to what we have invested.

Lets say I invested 1000 swap.hive and 10K #COLONY tokens. Now I watch how many transactions happen in this pair. If the volume of the pair is good then probably more chance of transaction is possible. According to the share we keep getting profit. Right now, the APR profit of these two pairs is above 25% which I think is very good.

Should we invest in any token in LP? No. You should invest in such pairs that have good future projects, are fundamentally strong and have high volume. The main reason for profit is high volume. If volume is lowm transactions will be low and profit will also be low.

Who should invest in LP? Anyone can invest but it is best for those who already hold #HIVE tokens.

For example right now I am holding #COLONY, #SWAP.HIVE and #HELIOS. Instead of only holding it is better to invest in LP so that passive income also keeps coming. This gives two benefits.. firstly continuous passive income and second, a chance of long term capital gain.

Another important thing about LP is profit and loss. Any business includes both profit and loss. There is no real investment without risk of loss or chance of profit.

In the same way LP also has profit and loss. What kind of loss? Impermanent loss. This is a temporary loss. It works like rebalancing keeping tokens balanced.

For example if the price of #COLONY increases and swap.hive stays stable then #COLONY tokens keep selling and #HIVE tokens keep buying. If the opposite happens and #HIVE price increases while #COLONY decreases then #HIVE sells and #COLONY buys.

This is called impermanent loss which is temporary. But if you are holding for the long term, you should not be afraid of impermanent loss. You should focus on consistency in your investment. If you choose the right pair you will get passive income and wealth growth.

I hope you guys will like this post and is interesting as well. If you find it informative then dont forget to give me a support. Share you reviews in the comment section below. Those who will interact will get my 100% upvotes. My staking is increasing. Thank you all for your time reading the content.

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REMEMBER: We should prepare for the unexpected and hope for the best. Life may not be easy, but you must do your best and leave the rest to God.