There’s no single “right time” to hold or provide liquidity; it depends on where the market is and what you’re trying to achieve. But understanding how both work can help you build smarter, longer-term positions.
Holding Tokens
When you hold tokens, your goal is simple - ride the price up. You’re not earning yield or fees, but you’re keeping full exposure to any price movement.
When it makes sense:
- •During bull markets, when prices are running fast.
- •When you believe the project is undervalued and could rise sharply.
- •If you want maximum upside and are comfortable with the risk.
The risk:
In a bear market, holding means you can see your bag fall in value quickly. You’re not earning any offsetting rewards or yield, so your position only benefits if the token’s price goes up.
Providing Liquidity
Liquidity pools (LPs) are what power trading on the XRP Ledger DEX. By adding equal value of two tokens (for example, DROP/XRP) into a pool, you’re helping people trade smoothly and earning a share of the trading fees.
When it makes sense:
- •During sideways or bear markets, when prices are calmer.
- •When you want to earn yield even while the market is quiet.
- •If you believe in the long-term growth of both assets in the pair.
When you provide liquidity, the pool automatically balances itself as prices move. If XRP goes up, the pool buys more DROP. If DROP goes up, the pool sells some DROP for XRP. That balancing is what keeps the pool stable; but it’s also what causes impermanent loss.
What Is Impermanent Loss?
Impermanent loss happens when the price of one token moves much more than the other. You’ll end up holding less of the one that went up and more of the one that didn’t; so compared to just holding, your total value may be lower.
But the word “impermanent” is important because it only becomes a loss when you remove your liquidity. If both tokens eventually rise together, your LP position can still come out ahead, especially once you include the trading fees you’ve earned along the way.
So… When Should You Do What?
In a Bear Market:
- •LPs can be safer because they smooth out volatility and earn fees.
- •Projects with deep liquidity pools tend to hold up better and trade more smoothly.
- •If you believe in the long-term future of the project, depositing into LPs helps both you and the project.
In a Bull Market:
- •Holding tokens directly can offer bigger upside if prices rise quickly.
- •But having some liquidity positions still earns yield and helps the ecosystem function while you benefit from price discovery.
The Sweet Spot:
Many experienced holders do both. They keep a portion of their tokens in LPs to earn yield and support the project, and another portion in spot holdings to capture pure upside during big runs.
Why It Matters for DROP
DROP doesn’t rely purely on buyers to move up. Our unique AMM and meme-pool strategy means that when other tokens in our pools go up, DROP automatically moves up with them. That’s the beauty of deep, diverse liquidity; it turns community growth into shared strength.
By holding both LP and spot, you’re helping DROP trade better, move more efficiently, and be ready for the next up-and-right wave across the XRPL.
Final Thoughts
There’s no one size fits all answer. Holding gives you full exposure. LP gives you stability, yield, and helps build the ecosystem. The smartest approach, especially in the XRP meme economy, is balance.
Build your conviction, support the pools, and let the AMMs do their job. When the next wave comes, DROP holders and LP providers alike will rise with it.