What is Concentrated Liquidity?

Concentrated liquidity, pioneered by Uniswap V3, allows LPs to focus their capital within specific price ranges rather than across the entire price spectrum. This dramatically increases capital efficiency. Earning the same fees with a fraction of the capital.

How It Works

Choose a trading pair (e.g., ETH/USDC)
Define your price range (e.g., $1,800-$2,200)
Deposit liquidity within that range
Earn fees only when price is in your range
Rebalance when price moves out of range

Strategy Types

Tight Range: Higher fees but requires frequent rebalancing Wide Range: Lower fees but more passive Asymmetric: Favor one direction based on market view

Risk Management

Impermanent Loss: Amplified in concentrated positions Range Management: Must rebalance when price exits Gas Costs: Rebalancing costs reduce returns

Track concentrated LP positions with Fensory.

How to Get Started

1Analyze price history and volatility
2Define appropriate price range
3Deposit liquidity in chosen range
4Monitor position and price movement
5Rebalance when price exits range
6Collect and compound fees

Pros

✓Higher capital efficiency
✓Potentially higher APY than full-range
✓Customizable exposure

Cons

✗Requires active management
✗Higher IL if price moves significantly
✗Gas costs for rebalancing