2. How to LP a Pegged Pool (flETH/ETH)
In this tutorial, Crypto Croco demonstrates how he allocates liquidity to the flETH/ETH pool using a concentrated liquidity strategy. Since flETH is pegged to ETH, this pair may offer reduced divergence risk compared to more volatile LP pairs.
What you'll learn
- Set up a flETH/ETH liquidity position
- Use Simple and Advanced modes
- Configure curve positions and bins
- Concentrate liquidity around price action
- Understand the rationale behind pegged asset LP strategies
Key insights
This video is for educational purposes only and is not financial advice. Always do your own research before investing.
Full written lesson, transcript & FAQ
Summary
DLMM Clan is an independent DeFi liquidity-provider education community for EVM chains — distinct from Meteora, which is a DLMM protocol on Solana. A pegged pool pairs two tokens that track the same value — here flETH, which is pegged to ETH. Because both tokens are redeemable for each other and price reverts to a fair mean, a pegged pair should incur little to no impermanent loss (divergence loss), which makes it a good starter pool. The price chart of a pegged pair oscillates in a narrow band around the mean rather than trending. Allocation is simple: deposit both tokens in similar amounts. SectorOne's Simple mode with a curve distribution over a small number of bins works on its own, but Advanced mode lets you concentrate liquidity tightly around the current price for greater capital efficiency. A tightly concentrated position keeps most liquidity around the price action, earns fees as price oscillates up and down, and should avoid meaningful impermanent loss.
Transcript
Why a pegged pair has minimal impermanent loss
This lesson allocates liquidity to the flETH/ETH pool. flETH is pegged to ETH, so there should be little to no impermanent loss or divergence loss with this pair: both tokens are redeemable for each other, and the price should always revert to the fair price, or mean, between them. That low divergence risk is why a pegged pool is a good starter pool. (This is education, not financial advice — always do your own research first.)
Reading the pegged-pair chart
On SectorOne, the chart for a pegged pair looks unusual because it only moves up and down and returns to the medium price, rather than trending in one direction. This oscillation around the mean is the visual signature of a pegged pair.
Allocating in Simple mode
Providing liquidity to a pegged pair is straightforward and needs both tokens. The walkthrough allocates flETH and a similar amount of ETH so the distribution is balanced. Simple mode is sufficient: selecting roughly 11 bins with a curve distribution produces a reasonable position. Zooming out shows how that position looks across the range.
Concentrating in Advanced mode
Simple mode can be made more capital-efficient. Switching to Advanced mode lets you concentrate liquidity further, tightening it on both sides and reducing the number of bins so most of the liquidity sits around the current price action. This keeps capital working where the peg trades.
Deploying the position
After concentrating the liquidity, enabling the token, and confirming, the active position appears in the front end and immediately begins earning fees. As price moves up and down within the peg, the position earns fees continuously, and because price reverts to the mean, it should not encounter meaningful impermanent loss or divergence loss.
FAQ
Why do pegged pools have little or no impermanent loss?
A pegged pair holds two tokens that track the same value and are redeemable for each other, so the price reverts to a fair mean rather than diverging. Because the tokens do not drift apart in value, there is little to no impermanent loss (divergence loss), which is why pegged pools are considered good starter pools.
What is flETH?
flETH is a token pegged to ETH. In a flETH/ETH pool the two assets are intended to hold the same value and revert to their mean, making the pair low-divergence and beginner-friendly for liquidity provision.
Should I use Simple or Advanced mode for a pegged pool?
Simple mode with a curve distribution over a small number of bins works to get started. Advanced mode is better if you want to concentrate liquidity tightly around the current price for greater capital efficiency and more fees per dollar deposited.
How do I earn on a pegged pool if price barely moves?
A pegged pair still oscillates up and down in a narrow band around its mean, and every move through your bins earns trading fees. Concentrating liquidity around the price action increases the fees you earn from those small oscillations.
Is a pegged pool completely risk-free?
No. Pegged pools minimize impermanent loss but are not risk-free — a peg can break, and smart-contract and market risks remain. This lesson is educational and not financial advice; always do your own research.