Liquidity Pool (Perp Dex)
A pool of digital assets provided by users to facilitate trading on a Perp DEX.
What is Liquidity Pool (Perp Dex)?
A liquidity pool in a Perp DEX is a collection of digital assets, typically stablecoins or major tokens like ETH, deposited by liquidity providers to enable trading and leverage for perpetual swaps. For example, GMX’s GLP pool combines assets like BTC, ETH, and USDC, which traders borrow against for leveraged positions, with profits and losses settled against the pool.
Liquidity providers earn fees from trading activity and funding rates but face risks like impermanent loss or losses from liquidations if the pool cannot cover defaults. Unlike traditional AMMs, Perp DEX liquidity pools are designed for derivatives trading, often using smart contracts to manage funds transparently. Providers can stake or unstake assets, with returns varying based on market activity and pool performance.
Related Terms
Implied Volatility
Market's expected annualized price fluctuation of an asset, derived from option prices.
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