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Liquidity Mining - What It Means and How It Works?

Learn everything about liquidity mining such as, what it is, how it works, its benefits, risks, types, examples, and more.
Token Metrics Team
9 minutes
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Liquidity mining is an innovative way to earn cryptocurrency rewards. It has emerged as an alternative to traditional crypto mining, which requires large investments of time, money, and energy. It is a new form of yield farming, where users can lend their tokens for a certain period of time and earn rewards for providing liquidity to a platform.

Liquidity mining is a great way to earn passive income, as it is relatively low risk and requires minimal effort. Moreover, liquidity mining is a great way to increase the value of a token, as it increases its liquidity and helps it become more widely traded. 

This article will explore liquidity mining, how it works, and how it can benefit you.

What is Liquidity Mining?

Liquidity mining is a process where investors can earn cryptocurrency rewards by providing liquidity to cryptocurrency exchanges or other decentralized applications.

In exchange for liquidity, the user earns a reward from the exchange or dApp in cryptocurrency made possible by charging a small fee from users.

How does Liquidity Mining Work?

There are several ways liquidity mining can work. The most common way is to connect an exchange to a market maker. The exchange is the market maker, while the market maker is the liquidity provider.

The market maker offers the asset to the market, which is the investor. The exchange then takes a fee for the market maker's service. The asset can also be paired with a US dollar (USD) pair, meaning the investor is paid in USD and gets to hold the asset. The asset is not traded on the exchange, so the exchange doesn't handle any more trading activity.

Benefits of Liquidity Mining

  • Passive income - Unlike trading cryptocurrencies, liquidity mining requires no time and energy investment by the participant. As a liquidity provider, all you need to do is provide liquidity to the exchange. Once the trading activity starts, you earn your crypto rewards, and the exchange takes care of all the accounting and regulatory issues. This is a great way to earn passive income, as it is relatively low risk (apart from impermanent loss) and requires minimal effort. 
  • Public exposure - When you participate in liquidity mining, you publicly expose your asset to the market. This can increase the asset's exposure and help it become more widely traded. 
  • Low risk - Many exchanges require participants to hold a certain amount of tokens to be eligible for rewards. You do not have to own any tokens to participate in liquidity mining; you can also hedge or short your rewards. This means you can participate in liquidity mining with low risk, as you are not fully exposed to the risk of holding tokens.
  • Market volatility risk - Some exchanges charge participants for the trading volume they generate, resulting in increased volatility and increased trading costs. This market volatility risk can be mitigated by diversifying your trading interests, i.e., trading a different asset from your investment. 
  • Investment risk - Since liquidity mining does not require investment for equipment and graphic cards, there is a shallow risk. This makes liquidity mining a great way to earn cash while protecting your money.

Liquidity Mining Vs. Staking

Liquidity mining and staking are two distinct mechanisms used in decentralized finance (DeFi) to incentivize user participation and encourage the growth of DeFi ecosystems.

Liquidity mining refers to a process where users can earn rewards for providing liquidity to decentralized exchanges (DEXs) by depositing assets into liquidity pools. The rewards are usually paid out in the protocol's native tokens. They are intended to incentivize users to participate in the DEX's liquidity, increasing its overall health and making it easier for other users to trade.

Staking, on the other hand, is a process where users can earn rewards for holding onto and "staking" certain cryptocurrencies or tokens. The rewards are paid out through newly minted tokens, interest, or a share of transaction fees. They are intended to incentivize users to hold onto their assets, increasing the network's overall security and ensuring its consensus mechanism's stability.

In short, liquidity mining incentivizes users to provide liquidity to DEXs or dApps, while staking incentivizes users to hold onto assets and participate in network security.

Liquidity Mining Vs. Yield Farming

Liquidity mining and yield farming are similar but distinct concepts in the DeFi space.

Liquidity mining incentivizes users to help provide the necessary liquidity for the DEX or dApp to function and can help increase the overall value of the platform.

Yield farming, on the other hand, is a strategy where users deposit their assets into a pool to earn a high return on investment (ROI). The assets are used to earn rewards through various mechanisms such as lending, borrowing, and staking. Yield farming can be considered a liquidity provision, but it goes beyond that by allowing users to earn rewards through more complex financial strategies.

In short, liquidity mining is a specific type of yield farming focused on providing liquidity to a DEX or dApp. In contrast, yield farming is more general for earning high returns through various financial strategies.

Is Liquidity Mining a Good Idea?

Whether liquidity mining is a good idea depends on the individual's perspective and investment goals.

From a DeFi ecosystem perspective, liquidity mining can be beneficial as it can lead to increased liquidity in DEXs, making it easier for users to trade and improving the overall health of the exchange. Liquidity mining can also attract new users to DeFi, contributing to its growth and development.

From an investment perspective, liquidity mining can provide the opportunity to earn rewards using a protocol's native tokens. This can be attractive for those looking to maximize their returns and potentially increase their overall investment portfolio.

However, like any investment opportunity, there are also risks involved with liquidity mining. For example, liquidity mining rewards can be subject to market volatility, and the value of the rewards may decrease or become worthless in the event of a failed project or a downturn in the DeFi market.

Risks Associated with Liquidity Mining

There are some risks associated with participating in liquidity mining. Some of the most common risks include: 

  • High exchange commission - The exchange charges a high commission for market-making, hedging, and matching trading activities. This means you end up losing money in case of low liquidity. 
  • Low trading volume - If trading activity on an exchange is lower, you may not generate good amount of money.
  • Impermanent loss - Providing liquidity to two-sided pair can make you lose more of a token that is higher in demand and more people are buying it. It means that when you withdraw your liquidity, you end up getting less of the more demanded token because everyone kept buying it from your pool.
  • Hacks - Due to the nature of smart contracts and publicly available code, people can try to hack the protocol, draining all of the funds on it.

How to Get Started with Liquidity Mining

Now that you know about the liquidity mining concept, it is time to get started in a few steps. 

  • Get the funds ready - Make sure you have the funds ready before you can deposit them in the pool.‍
  • Choose the right exchange - There are a lot of exchanges out there, and it is imperative to choose the right one. You must pick an exchange with a high trading volume, good liquidity, and low fees. ‍
  • Add liquidity- Time to add the liquidity to the pair of your choosing. The more liquidity that you provide, the higher your share in that pool.‍

The Bottom Line

Liquidity mining is a unique way to earn passive income while providing liquidity to a platform. It is a great way as it is relatively low risk and requires minimal effort.

However, keep in mind the risks associated with providing liquidity like impermanent loss and exchange hacks.

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→ Join the waitlist to be first to trade TM Global 100.

Why Indices Matter in October 2025

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Definition

A crypto index is a rules-based basket of digital assets that’s constructed, weighted, and rebalanced on a set schedule.

How the TM Global 100 Index Works (Plain English)

  • Regime switching: Bullish: Hold the top-100 crypto assets by market cap.
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  1. Open the Indices Hub: Head to the Token Metrics Indices hub.
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  3. Join the Waitlist: Add your email to be notified the moment trading opens.
  4. (Optional) Connect Wallet: Pre-connect your wallet for a faster launch-day checkout.

Launch-Day Flow (~90 seconds): Tap Buy Index, review fees/slippage, confirm, and see your position in My Indices. Track Rebalances: After each weekly rebalance or regime change, check the Transactions Log for updates.

→ Join the waitlist to be first to trade TM Global 100.

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FAQs

1) What is a TM Global 100 index?

It’s a rules-based crypto index that holds the top 100 assets by market cap in bullish regimes and moves to stablecoins in bearish regimes. It rebalances weekly and shows transparent holdings and transactions.

2) How often does the index rebalance?

Weekly, with additional full-portfolio switches when the market regime changes.

3) What triggers the move to stablecoins?

A proprietary market signal. When bearish, the index exits all token positions into stablecoins and waits for a bullish re-entry signal.

4) Can I fund with USDC or fiat?

At launch, funding and settlement options surface based on the embedded wallet and supported chains. USDC payouts are supported for selling; additional entry options may be introduced later.

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No. The Embedded Wallet is self-custodial—you control your funds while using a streamlined, on-chain checkout.

6) How are fees shown?

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7) How do I join the waitlist?

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  • Auditability: Holdings, treemap, and transactions log are always visible.
  • Model limits: Regime logic can be wrong, and markets can gap; rules reduce discretion—not risk.
  • Regional availability: Product surfaces may vary by region as we expand.

Crypto is volatile and can lose value. Past performance is not indicative of future results. This article is for research/education, not financial advice.

Conclusion

If you want a disciplined, rules-based core that adapts to market regimes, Token Metrics Global 100 is built for you. Weekly rebalances, transparent holdings, and one-click buy remove operational friction so you can focus on your strategy.

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To gain early exposure, follow these steps:

  1. Open the Token Metrics Indices hub.
  2. Select TM Global 100 and view its details.
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Is This Index Suitable for You?

Consider your investment style:

  • Hands-Off Allocator: Ideal if you prefer broad market exposure with minimal management.
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  • New to Crypto: Great for beginners seeking transparent exposure through simplified flows.
  • DIY Enthusiast: Replace complex basket-building with a rules-based index.
  • Self-Custody User: Benefit from integrated self-custodial wallets with clear transaction records.

FAQs

What is a top crypto index?

It is a rules-based basket that tracks a defined universe of digital assets—such as the top 100 by market cap—using transparent methodology and scheduled rebalancing.

How often does the index rebalance?

The index rebalances weekly, with regime switches occurring when market signals change, ensuring adaptability during different market cycles.

What prompts the move to stablecoins?

A proprietary market-regime signal triggers the transition, exiting token positions to stablecoins during bearish periods and re-entering when signals turn bullish.

Can I fund with USDC or fiat?

At launch, the embedded wallet will support supported funding options based on your chain or wallet. USDC payout is available upon sale; further options may follow.

Is the wallet custodial?

No. It’s an embedded, self-custodial smart wallet—giving you full control over your private keys and funds.

How are fees shown?

Estimated gas, platform fee, slippage, and minimum expected value are displayed before you confirm the transaction, providing full transparency.

How do I join the waitlist?

Visit the Token Metrics Indices hub or the TM Global 100 page, tap “Join Waitlist,” and follow the instructions to register your interest and prepare for launch.

Disclaimer

Crypto assets are highly volatile and can result in significant losses. Past performance does not guarantee future results. This content is for research and educational purposes only and not financial advice.

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If you’ve tried to “own the market” in crypto, you’ve felt the pain: chasing listings, juggling wallets, and missing rebalances while prices move. A top 100 crypto index aims to fix that—giving you broad exposure when the market is bullish and standing down when it’s not. Token Metrics Global 100 is our rules-based version of that idea: it holds the top-100 by market cap in bull regimes, moves to stablecoins in bear regimes, and rebalances weekly. You can see every rule, every holding, and every rebalance—then buy the index in ~90 seconds with an embedded on-chain flow.‍ → Join the waitlist to be first to trade TM Global 100.

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The market keeps cycling. New leaders emerge quickly. A “set-and-forget” bag can fall behind, while manual baskets burn hours and rack up slippage. Search interest for crypto index, regime switching, and weekly rebalancing keeps growing because people want a simple, disciplined core that adapts.

A top 100 crypto index is a rules-based basket that tracks the largest 100 crypto assets by market cap, typically rebalanced on a schedule to keep weights aligned with the market. In 2025, that alone isn’t enough. You also need discipline for downtrends. Token Metrics adds a regime-switching layer to move to stablecoins during bear phases—so you can participate in upside and sit out major drawdowns with a consistent, rules-based approach.

How the TM Global 100 Index Works (Plain English)

Regime switching:

  • Bullish: The index holds the top-100 assets by market cap.
  • Bearish: The index exits positions and moves fully to stablecoins until a bullish re-entry signal.

Weekly rebalancing:

  • Every week, the composition and weights update to reflect current market-cap rankings. No manual list maintenance. No “oops, I missed the new entrant.”

Transparency:

  • Strategy modal explains selection criteria and regime logic.
  • Gauge → Treemap → Transactions Log shows the signal, the real-time holdings view, and every rebalance/regime switch.

You’ll always see what you own, how it changed, and why.

What you’ll see on launch

  • Price tile, 100 tokens, “rebalances weekly,” and one-click Buy.
  • Gauge to visualize the market signal.
  • Holdings Treemap and Table to inspect exposure.
  • Transactions Log to review every rebalance.
  • See the strategy and rules.

Benefits at a Glance (Why This Beats DIY)

  • Time saved: Skip hours of asset chasing and manual spreadsheets; rebalances happen automatically.
  • Lower execution drag: One index buy can reduce slippage vs. piecing together 20–50 small orders across chains.
  • Never miss a rebalance: Weekly updates and on/off risk switches run by rules, not vibes.
  • Rules-based switching: A clear trigger defines when to sit in stablecoins—no second-guessing.
  • Full visibility: The gauge, treemap, table, and log make the process auditable at a glance.
  • Operational simplicity: An embedded wallet, 90-second buy flow, fee and slippage estimates upfront.

Step-by-Step: How to Get Early Access (Waitlist)

  1. Open the Indices hub and tap TM Global 100.
  2. Join the waitlist with your email—this flags you for day-one access.
  3. (Optional) Connect your wallet so you’re ready for the embedded checkout.
  4. Launch day: You’ll get an email and in-app prompt when trading opens.
  5. Buy in ~90 seconds: Connect, review fees/slippage/estimated value, confirm.
  6. Track positions: See your holdings, rebalances, and P&L in My Indices.
  7. Repeat or add funds: Rebalancing is handled weekly; you can add or sell anytime.

→ Join the waitlist to be first to trade TM Global 100.

Decision Guide: Is This Right for You?

  • Hands-Off Allocator: Want broad market exposure without managing coin lists? Consider it.
  • Active Trader: Want a disciplined core you don’t have to watch while you chase setups? Consider it.
  • TM Member (Research-Heavy): Prefer to keep your picks, but want a market base layer? Consider it.
  • New to Crypto: Need transparency + clear rules? Consider it, with a small test first.
  • Hyper-Niche Maxi: If you only want 1–2 coins, an index may be too broad.
  • Short-Term Scalper: You may still benefit from a core allocation, but active trading stays your main driver.
  • Tax-/Jurisdiction-Sensitive Users: Check your local rules before investing.
  • Institutional Explorers: Looking for transparent rules, logs, and weekly governance? Worth evaluating.

FAQs

What is a top 100 crypto index?

A rules-based basket tracking the largest 100 assets by market cap, typically with scheduled rebalancing. Token Metrics Global 100 adds regime switching to stablecoins during bear markets.

How often does the index rebalance?

Weekly. In addition, if the market signal flips, the entire portfolio may switch between tokens ↔ stablecoins outside the weekly cycle.

What triggers the move to stablecoins?

A proprietary market-regime signal. When it’s bearish, the index exits tokens to stablecoins and waits for a bullish re-entry signal.

Can I fund with USDC or fiat?

On launch, funding options surface based on your connected wallet and supported chains. USDC payouts are supported when selling.

Is the wallet custodial?

The embedded wallet is self-custodial—you control your funds.

How are fees shown?

Before you confirm a buy, you’ll see estimated gas, platform fee, max slippage, and minimum expected value—all up front.

How do I join the waitlist?

Go to the TM Global 100 page or the Indices hub and click Join Waitlist. You’ll get notified at launch with simple steps to buy.

Security, Risk & Transparency

  • Self-custody: Embedded, self-custodial smart wallet; you control keys.
  • 2FA & device checks: Standard authentication best practices.
  • Fee/slippage transparency: All estimates are shown pre-trade; you confirm with eyes open.
  • On-chain visibility: Holdings, rebalances, and regime switches appear in the Transactions Log.
  • Rule constraints: Signals can be wrong; spreads and volatility can impact outcomes.
  • Regional considerations: Availability and tax treatment vary by jurisdiction.

Crypto is volatile and can lose value. Past performance is not indicative of future results. This article is for research/education, not financial advice.

A top 100 crypto index is the simplest path to broad market exposure—if it’s built with discipline. Token Metrics Global 100 combines transparent rules, weekly rebalancing, and a regime switch to stablecoins, so you can focus on your strategy while the core maintains itself. Now’s the time to claim early access.‍ → Join the waitlist to be first to trade TM Global 100.

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