Trade Opportunities

Traders use this section of the platform to trade cryptocurrencies. Trader Joe's liquidity book implementation and concentrated liquidity promise that the slippage on swaps tends to be zero or minimal, no matter how many assets you want to swap. If you want to use this part of the platform for trading, you can do so in a similar manner to traditional exchanges, for a long position. Below, we show you how to create short positions in the lending / borrowing section.

Pool Opportunities

The safest strategies for providing liquidity are those where there is as little impermanent loss as possible; i.e., the assets should be as correlated in price to each other as closely possible, but at the same time, they must generate sufficient profit for the user from swaps fees. Trader Joe has introduced a liquidity book that uses concentrated liquidity. We explain the detailed workings of the liquidity book in Trader Joe - Protocol.

If you decide to provide liquidity at Trader Joe, you should know that the more concentrated the position range, the greater the amount of swap fees you earn. At the same time, there are downsides to this because if the liquidity range is too tight and the asset price changes outside of that range, profit rewards will be suspended until the asset price comes back into the range. In addition, the more concentrated the position, the higher the impermanent loss. When choosing a strategy, you need to think about how much time you will be able to devote to managing the position.

Trader Joe offers us a choice of 4 liquidity shapes:

Normal

Distributes liquidity along a bell curve, making it similar to order book liquidity on the traditional exchanges. It allows you to capture fees from both price increases and decreases while concentrating liquidity around a price point. This strategy is perfect in a calm market, but its disadvantage is if volatility increases in the market, this can cause an impermanent loss. For maximum effectiveness, the strategy requires active management and rebalancing.

Max (Uniform)

Liquidity is allocated to all currently available price bins, which is similar to the composition of liquidity on traditional decentralized exchanges x*y=k. This strategy is passive, as you do not have to devote much time to it compared with others, and also has the lowest risk of impermanent loss. The downside, however, is that your capital is not very efficient.

Spot (Uniform)

Spreads the liquidity evenly over a range that you define, or puts it all in one price bin, depending on the parameters you set. The lower the range, the higher the fee yield and the more efficient your capital. This strategy is best suited for minimally volatile pairs such as stablecoins. Take into consideration that this strategy carries the risk of large impermanent losses.

Bid - Ask

Imitates the spread between the bid and ask, as can be seen in order books on the  exchanges. This strategy allows liquidity providers to earn fees when markets fluctuate. With the Bid-Ask strategy, users can capture market volatility while allowing them to DCA into / out of a position. The Bid-Ask strategy is considered riskier than other strategies.

Useful tools that can help in creating LP:


_{Crypto correlations matrix}

Farm Opportunities

Farms at Trader Joe work on the process of providing liquidity, so you will need to create an LP. The difference is that in farms, you receive additional rewards in the native JOE token. As with pools, you should choose the most correlated assets to avoid any impermanent losses.

Profits in Trader Joe's farms are as follows:

Top farms: Rewards in JOE + another token as a bonus.

Boost farms: For staking more veJOE tokens in ‘Stake’, you get extra rewards in JOE tokens in boost farms.

JOE farms: Rewards in JOE tokens.

Stables farms: Rewards in JOE tokens.

To create an LP for the farm of your choice, just click on ‘Get LP Tokens,’ as marked in the picture. Once you have done this, insert the created LP into the farm, and you will start earning rewards immediately.

Staking Opportunities

In the staking section, you can stake native Trader Joe platform tokens, which will earn you rewards and various benefits. For example, you can access the opportunity to participate in new project launch events via the Trader Joe launchpad.

Lending / Borrowing Opportunities

With borrowing, traders can open short positions on the platform. All they need to do is provide collateral in stablecoins. They can then use up to 80% of the collateral to borrow another cryptocurrency whose price they are predicting will drop.

For example, let’s imagine you borrow 80 AVAX at a price of 100 USDT per 1 AVAX for collateral of 10 000 USDT. Immediately after you borrow it, you can swap it in the ‘Swap’ section for USDT, for which you will receive 8000 USDT. If your prediction is right and AVAX is at a price of 80 USDT for 1 AVAX, when you buy 80 AVAX again, which will cost you 6400 USDT.  Therefore, your net profit is 1600 USDT. You can then return the 80 AVAX tokens and withdraw your deposited collateral.

Risks associated with borrowing short strategy:

If the position does not go according to your prediction, you are at risk of liquidation if it exceeds the allowed collateral ratio. Before this happens, you must add more collateral or accept a loss and return some or all of your borrowed AVAX.

NFT Opportunities

NFTs represent a very risky market. Just as you can trade cryptocurrencies, you can also trade NFTs by speculating on the upside of their value. If you are a beginner and interested in NFTs, it is a good idea to gain a decent knowledge of the market before you enter. To be able to trade NFTs and be profitable at the same time, you need to master the many skills that this market requires, as well as spending hours on the Discord channels related to the particular NFT collection you want to start trading with.

Similar protocols that could also be considered competitors are Uniswap v3, Curve, SushiSwap, PancakeSwap, and Balancer. Currently, Trader Joe’s competition on the Avalanche blockchain is Curve, Pangolin, or Platypus Finance. Trader Joe is doing well on the Avalanche blockchain and a little while after its launch, it overtook all other decentralized exchanges built on the blockchain in terms of TVL, a leading position it has maintained to this day (Dec 2022). The planned deployment of Trader Joe on the Arbitrum blockchain is expected shortly, where it will also face competition from several of the leading DEXs of the DeFi world.

We have described the opportunities and strategies that we have tried on the Trader Joe platform. The advantage of Trader Joe is that almost everyone will find their niche, whether it's trading, providing liquidity, yield farming, lending/borrowing, staking, or the NFT marketplace. We've tried to describe at least one option from each section, so you have as much information as possible on how to use Trader Joe wisely and make consistent profits. If you have been inspired by some of the strategies we have mentioned in this article, and you want to try them out, start with a small amount of capital and get thoroughly familiar with the specific strategy first. Investing in DeFi is very risky, and on the Trader Joe platform, this is no different.