What is the 20 Bin Strategy?
The 20 Bin Strategy is a liquidity provision technique that differs from traditional approaches by using:
- Smaller bin steps (20 bins instead of 100 bins or more)
- Lower base fees (0.2% instead of the usual 0.25%-2%)
This method allows liquidity providers to:
- Capture more frequent small price movements
- Earn more fees compared to larger bin-step pools
- Compete effectively against higher-fee liquidity pools
Traditionally, liquidity providers used larger bin steps with higher fees, but recent data shows that 20-bin, 0.2% fee pools are now dominating in terms of TVL (Total Value Locked) and fee generation on Meteora.
How and Where to Set Up the 20 Bin Strategy
Step 1: Choosing the Right Pool
Before using the 20 Bin Strategy, ensure the following conditions are met:
- The token is not too volatile (avoid tokens with price swings of 30%-50% in short periods)
- The market cap is at least $20 million
- The token has been trading within a defined range for multiple days
- The 24-hour trading volume is high to maximize fee generation
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Step 2: Setting Up Your Liquidity
- Use Meteora’s LP interface to create your liquidity position
- Ensure that your liquidity range covers at least 25% of the token’s price movement using 2 – 5 spot positions
Step 3: Monitoring and Adjusting
- Track your unclaimed and claimed fees regularly
- If price movements push you out of range, consider adjusting positions
- If market conditions change drastically, decide whether to exit or reposition
Live Example: Applying the 20 Bin Strategy
At the time of recording, a token called Fartcoin was analyzed using this strategy.
Key Observations on Fartcoin
- The most successful pool had a 20-bin step and a 0.2% fee
- The token ranged within a 26% price band for several days
- The 24-hour fee generation was around 15%, indicating high liquidity activity
Position Setup for Fartcoin
- Five Solana was allocated across three bin positions
- The goal was to stay in range for several days to maximize fees
- Ultra LP, a tracking tool, was used to monitor position performance and fee generation
Results & Learnings
- The strategy worked well because Fartcoin maintained a stable range
- The daily fee earnings were around 10%
- The position remained profitable as long as the token stayed within the set range
Risks and Considerations
1. Falling Out of Range
- If the price moves too much, your position may become inactive, leading to missed fee opportunities
2. Impermanent Loss
- If the price drops significantly, you could end up holding the token at a loss
3. Market Conditions
- If overall crypto markets drop, the strategy might need adjustment or early exit
How to Mitigate Risks
- Use multiple positions (3-4 instead of just 2)
- Exit quickly if the market starts breaking the expected range
- Only choose tokens that have already retraced from their all-time highs
Final Thoughts
The 20 Bin Strategy is an effective way to maximize fee collection while reducing exposure to high volatility. It works best in high-volume, low-volatility markets and requires active monitoring.
By following this guide, you can confidently set up, manage, and optimize your liquidity positions on Meteora.
