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How Does a Higher Trading Volume Impact the Profitability of a Liquidity Pool?

A higher trading volume directly increases the total fees generated by the pool, as fees are a percentage of each trade. Since LPs earn a proportional share of these fees, higher volume leads to greater fee accrual and thus higher profitability for the LPs.

This increased fee income is crucial for offsetting any impermanent loss and achieving a positive net return.

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