Concentrated Liquidity: How It Works and Why It Matters in Crypto Trading

When you provide liquidity in DeFi, concentrated liquidity, a feature that lets liquidity providers assign their funds to specific price ranges instead of across the entire curve. Also known as custom-range liquidity, it turns passive capital into an active trading tool. Before Uniswap V3, liquidity providers had to spread their funds across every possible price point—wasting capital and earning less. With concentrated liquidity, you choose exactly where your money works, like setting a price range where you expect a coin to trade. This means less capital is tied up, and your returns per dollar can be much higher—if you get the range right.

But this power comes with trade-offs. If the price moves outside your chosen range, your tokens stop earning fees until it comes back. That’s why automated market makers (AMMs), the core engines behind decentralized exchanges like Uniswap and SushiSwap had to evolve. Traditional AMMs used a constant product formula that treated all price levels equally. Concentrated liquidity changed that. Now, AMMs can mimic order books, giving users more control while keeping the trustless nature of DeFi. This shift also affects impermanent loss, the risk of losing value compared to just holding your tokens. With concentrated liquidity, impermanent loss isn’t just a function of volatility—it’s tied to how wide or narrow your range is. Too narrow, and you get pulled out of the market fast. Too wide, and you lose the efficiency advantage.

People using concentrated liquidity aren’t just passive stakers anymore. They’re active market participants, often using tools to track volatility, set dynamic ranges, and rebalance positions. It’s not for beginners who just want to earn yield. It’s for those who understand price action and are willing to manage their positions. You’ll see this in posts about Uniswap V3, where traders optimize fee tiers, combine ranges with leverage, or even build bots to auto-rebalance. But you’ll also find warnings—like when a token crashes and your entire position gets pulled out of the market, leaving you stuck with a losing asset. This isn’t just theory. Real users have lost money because they didn’t account for sudden price swings or underestimated how fast a token could move.

What you’ll find below isn’t a list of generic guides. It’s a collection of real-world cases: how traders use concentrated liquidity on TON, why some DeFi protocols ignore it entirely, and how even big exchanges like MEXC and NovaEx are adapting to this new way of providing liquidity. Some posts show how to set up ranges safely. Others expose the hidden risks in low-liquidity pools. You’ll learn what works, what fails, and why the same strategy can make one trader rich and another broke. This isn’t about luck. It’s about understanding where your capital is working—and when it’s not working at all.