Core Differences Between Trading and LP According to Gemini: The essence of trading is predicting the first derivative of price (direction); While the essence of LP is predicting the second derivative of price (volatility) and range—you’re essentially selling options. So, the latter requires you to not only care about the direction of price but also the magnitude. When prices move downward, IL (impermanent loss) increases (positive IL from upward movement can be temporarily ignored); If the volatility is too high, it’s easy to break out of the range, and you’re no longer participating in LP market-making but becoming a passive trader; If the volatility is too low, trading volume drops, FEE earnings slow down, and opportunity costs increase. So, the core of all this becomes: The race between FEE and IL.