When choosing a fee tier in a V3 AMM, consider these factors:
- Trading Volume and Liquidity: Opt for lower fees in high-volume pools and higher fees in lower-volume pools.
- Asset Volatility: Choose higher fees for volatile assets to offset risk, and lower fees for stable assets.
- Market Conditions: Adjust fees based on overall market trends and activity levels.
- Competition Among Pools: Set competitive fees in relation to similar pools.
- Risk Appetite and Strategy: Align your fee choice with your risk tolerance and investment goals.
- Historical Performance: Use past pool data to inform your fee tier decision.
Additionally:
- Sushi UI Guidance: The Sushi UI can show the most commonly selected fee tiers by others, providing a helpful reference point.
- Variation Within the Same Token Pool: Sometimes, even within the same token pool, different fee tiers exist. It's important to consider these variations as they can indicate different risk-reward balances within the same asset class.
Always be prepared to adjust your strategy as market conditions change.