Too many people are talking and worried about impermanent loss and we should be talking about exposure risk associated with shitcoin LPs. Glad thats the first thing you mentioned.
Some rules of thumb that helped me when it comes to IL: -symmetrically enter if you are bullish on both assets long-term, choose a deep pool to reduce slippage fee -do not assymetrically enter with the asset that you believe will outperform -assymetrically enter with the asset that you believe is going to underperform -do not enter pools with speculative / volatile altcoins
This is so helpful. Would you mind clarifying one thing though? When you say “ASYMMETRICALLY enter with the asset you believe will outperform”, do you mean: A. add MORE of the strong token in relation to the other (ex. 2 ETH + 1 shitcoin) B. add LESS of the strong token in relation to the other (ex. 1 ETH + 2 shitcoin) In other words, asymmetric in relation to what? Thanks!
I think of LP as a strategy similar to grid trading: buy low and sell high done through auto balancing. Even better, LP earns transaction fee and sometimes liquidity mining reward on top.
The thing is that while HODLing both 50/50 gives you diversification, impermanent loss goes up as one of the assets underperform. You are guaranteed to be on the losing side of any sustained move in either direction as the position is rebalanced.
Essentially, you got to pick 2 good assets that will BOTH perform. If you pick two bad ones, you lose on both sides in real value terms. Obvious. However, less obvious is the fact that if you pick one good asset and one that underperforms over the longer term vs. the other, you will continue to suffer impermanent loss, most likely in excess of any fee gain. Most importantly, Crypto performed due to ultra low interest rates. With rates high (and real rates positive), there is no good reason to hold an asset that doesn't generate income. So crypto will generally underperform until this dynamic changes (Fed reverses policy). So, while this is not financial advice and you should DYOR, I'd say people are better off putting their money into a basic savings account (insured by FDIC and earning a safe and generous 5% interest) and wait out the current financial environment. If it changes, crypto might make sense again and that's the time to deploy your (increased) capital.
@Justin Bram, I don't even know how many videos I've seen and was still confused on the concept. You made it super clear. Thank You very much, you are awesome!
Thank you so much bro!!!! I’ve made so much more locking in my returns with fees than buying, holding and losing out because I keep waiting for more and end up losing because massive sell offs in the past
Hey Justin. Thanks for the clear and concise explanation + all those additional links. Really enjoy watching your vids for some weeks now and what a bummer I did not found your channel earlier. Keep it up for us. Much appreciated!
Thank you for the fantastic video. This made me think of the impermanent loss from another angle. Most articles make it look like something one should be afraid of, but in a way, it's a good thing. Now I think of it more as a hedge.
Great video Justin. There is always a friend that says my 2 assets are up 10x and 5x. But I lose $100K due to IL. People are pessimist by nature and these guys wont find happiness anytime soon.
Unless you enter a stablecoin LP pair, IL is inevitable. The hopes is the LP rewards/APY% will make up for the loss so you are at a net gain. The best scenario is you get out of a LP contract at the same price you went in or both pairs pump relative to each other. It's a risk/reward descision.
BEST BEST BEST EXPLANATION. Great job Diving deep i love it. I'm currently providing liquidly for Sandbox with a Matic pair and rn they have about a $94 M TVL W a 160% Apr. No impermanent loss because although the coins went up from the time of stalking they're pretty equal in value comparison.
Great video (and cohost)! Thank you for doing this topic. The only time I really consider pl is when I am wanting to accumulate a particular coin, like in a down market, I wouldn't want to pair it with something that would go down further, or I would lose some of those coins when splitting the lp.
I generally agree that impermanent loss shouldn’t be the primary risk factor to consider, but the one exception to this is when there’s an extreme price movement (such as an asset potentially going to 0) that could wipe out your entire position due to the mechanics of the LP. That’s the one scenario in which your impermanent loss is going to become catastrophic. So a recommendation for super speculative assets might be to just hold, or single stake.
Yes agreed. Good point. I don’t enter pump and dumps or purchase tokens that have a high chance of going to 0 (or cover them on the channel), so I don’t worry about it and didn’t mention that. Great addition, though!
@@JustinBram how about you joined a good project in it's early stages and pair it with Matic for example, but your new coin goes 20x etc eventually - does it mean I would lose 20x the amount of new tokens in that pool and would end up back to same money i have invested, even if that coin made 20x in price? Thank you
when i calculate my current IL, it's 47% currently in armor/eth 50/50 Does that mean if i was to withdraw i would recieve an extra 47% in armor and 47% less in eth?
When you are providing liquidity, how often are the assets in to pool rebalanced? If you have a lot of volatility on a daily basis, doesn't the rebalancing effectively give you significant losses? So, for example.. you provide liquidity for SOL/RAY. Ray takes a 30% dump, Sol drops 10%. Wouldn't the pool sell Sol and buy Ray? Then when Ray starts back up - relative to Sol, wouldn't the pool sell Ray and buy Sol, effectively capturing significant losses in the Ray token?
Excellent video thank for the clarification on Uni V3, I have some liquidity there doing nothing with pair TRU/ETH, a disaster. But on the other hand I have ETH/ALCX on Sushi and at the moment its a triumph .
@@JustinBram Well thanks for make me search for Visor, I did not know that it existed 😅. Anyway mu problem is that I entered to that liquidity pool when TRU was like 90¢ , now is 26¢ plus my range on V3 was not wide enough and now the impermanent loss is like 75% and I’m not receiving any fee.
Awesome Vid! Actually gave me a positive feeling when dealing with this situation. I entered the mSand-Matic LP and had no idea about IL upon entering. Then I heard some horror stories about LP pools that suffer from IL. But I entered this position feeling extremely confident on both matic and sand. So If they both go up then I should be ok right? I was going to hold them long term anyways so I figured why not pair them together. Also the APR is incredible! Thank you!
@ the 5:15 mark, that made so much sense. I wouldn't be buying the pairs I'm looking at anyway. Now, I could have exposure to them, plus collecting fees, if I have a little impermanent loss, well, at least I'll have gains in those coins I would have never been holding. I'm still waiting on the Russia/Ukraine and the Mar 10 inflation report and Mar 15 Fed meeting b4 I do anything. Things could get very bearish. Can't time the bottom but the bottom is great for LPs I think. I'm still learning.
I think a bigger worry is pools that close. If you have some very speculative coins in an LP pool and you can wait it out you can recover your loss, but if the pool closes you are in trouble.
Nice presentation explaining the meaning of impermanent loss. Comparing impermanent loss vs overall portfolio gain/loss is the correct approach to view this type of investment. Thanks.
I think as long as you are overall making money even if the impermanet loss offsets your APR by a significant amount. If you can invest in something and always be making money you should be satisfied. Seeing APR's of 150-500% obviously I expect some impermanent loss but just say once you take into account impermanent loss and I make 50% on my investment which you could compound back I think that is still kickass and well worth it! To me that still seems too good to be true!
Great content, impermanent loss can be a huge factor hindering liquidity miniers success. Since Grizlyfi reduces impermanent loss and ensures stable and predictable income for investors, you should definitely give it a look and maybe create a video about it.
I like your video and mostly agreed with your explanation here, but I think you missed some nature of AMM position. By the rule of AMM position, AMM LP hold more asset that people in the market didn't want to hold. For example, if I hold X token and ETH by 50:50 at the beginning, and people in the market don't want to hold X token anymore and dump them to the AMM LP, then LP have to swap all his ETH to X Token. And Price of X Token will be tanked. Efficient frontier of modern portfolio assume that people hold fixed portion of each assets all the time, so there's some difference in AMM case. And as you already said on the video, If two assets in AMM position is highly correlated, then effect of decreasing volatility in diversifed portfolio is really small.
Great video, have one question. Do you get back the exact number of tokens that you put in? Ex. Eth/Dai Would you receive back the same amount of those two that you put in originally?
I think it's still important to consider as per the last bit of your video that you lose more when the asset drop due to IL. You mentioned diversification between dai and eth, but if you were to compare strictly to holding dai and eth, your IL would still cause you to lose more. So with that said, I think IL should still be a consideration factor, if you are holding assets that you are not willing to hold for the longer term. Worst case is if you draw out your LP when the asset drops, incurring high IL and farm/swap fees weren't enough to cover the IL.
"your IL would still cause you to lose more." Yeah but you've got to remember you made $$$ by doing the liquidity provision. So how much did you net, and is it enough to offset the loss or not?
The key is to find the coin with solid fundamental to provide LP in the first place. Otherwise if one the coin goes to zero, the LP will go to zero too, just like what happened to Titan/Matic pool a few weeks ago.
Thanks for the great video. Now i can invest without worrying about impermanent loss! Now if platform shuts down and doesn't provide an option to withdraw tokens then I could have impermanent loss and it is crypto so even a big company can rug pull
Im confused about this. What if the fiat value of both coins goes down and I withdraw my LP? Say Coin A is worth $1.00 when I deposited LP and Coin B was 0.50. So, I put in 50 of coin A and 100 of coin B. Then, the value of both went down. Coin A by 10% and coin B by 30%. When I withdraw, are the amount of coins A and B I get back equal to the number originally deposited (100 and 50) and just the total fiat value is different? or would I end up with more of coin B than initially deposited?
I have a question, that loss that you're calculating is just in a specific time frame however if you take in consideration compounding then you'll have a bigger loss, it's like a leveraged etf like a 3x s&p for example, when the s&p goes down for example -1%, you have a loss of -3% however to get back your loss the etf has to go up 3.1%, I think the same applies here, you're impermanent loss is higher if you consider compounding, but I'm not exactly sure
Let's say I like MATIC/USDC and I want to be in this pool. What if you pick tighter ranges to gain more in fees (let's say looking to gain 8% a month in fees). In this case, you might need to rebalance once a week or maybe 2 times to keep that APR. Wouldn't that eventually wipe out all the capital you invested if you keep rebalancing?
U used balancer calculator which is know as a dapp that covers impermanent loss right? Would that have changed if used a sushi calculator for example? Would be interesting to see a video topic about farming LP tokens, how can most of the vaults have so much more apy than the liquidity pool itself?
In the example you gave about BTC and ETH - you didn't mention how the accrued fees could make up for the 5.xx% impermanent loss. Is that how to look at it?
It will make you always go up 50% or down 50% relating to dóllar. Like, a token costs 100 dollars, you make a 1-100 lp, than the token go to 400 dollars, in the pool you will have 0,5 token and 200 dóllars, totalizig 400, but if you have only hold it, you would have 500 (400 + 100), dont know if i'm clear enough
In your uniswap v3 video you expressed your view on impermanent loss. You recommended a range for liquidity on eth-usdc of 2000-3000, this tight range magnifies your impermanent loss by just over 10x. At this level it is the most important factor in determining if your lp provision is profitable. Eth and usdc are not correlated assets. If you provide liquidity on v2 in correlated assets il is not a big concern. If you provide liquidity on v2 in uncorrelated assets it is some concern. If you provide concentrated liquidity in v3 on uncorrelated assets it is of great concern. ‘What is impermanent loss and why you shouldn’t care about it’ is a generalisation that is wrong.
hi , thanks for your videos , Maiar is lunching the dex soo and there is a egld -mex pool would it be risky to go in full blast at the beginning and there pull out some of the liquidity ? when is the best to pull out of a liquidity ?
In this case, the 2% demonstrated is denominated in the ETH/BTC ratio isn't it? (So part of that loss is ETH @ say $3000, and part of that loss is BTC at say $45000.) Doesn't that mean as it could be significant in fiat terms?
I’m not sure why you would provide the liquidity on any pair with a stable coin? It only seems to give massive impermanent loss if the other coin moons
The point in PL with a stable is that if eth goes down, you lose less money, and if go up, you win less money, PL with a stable is like a protection and to earn the fees
The longer your providing liquidity.. the more fees accumulated, The less risk impermanent loss will cause making less then just holding the original amount? This is correct yes?
I have noticed that from day to day the amount of tokens can be more or less. If the token goes up by 10x do you get back less tokens because it has gone up? Why would the amount of tokens change?
Im in 1 thats 406k% only have like 30$ in it but are you telling me token could go to 0 and id still get 406k% of my original position? Im brand new to lp
This is why I dont agree: If any of the assets in que liquidity pool goes to zero, your whole portfolio goes to zero. So row does your risk decreases if its actually increasing? If you had all the cryptos in the market inside a single liquidity pool your portfolio would pretty much value zero overtime.
@@C0IDl But you are still increasing your risk noneless. If you own ETH + BTC instead of putting them inside a liquidity pool, you have lower risk. You are always increasing risk unless you find 2 perfectly correlated coins (1:1), in wich case they are effectively the same coin, and there is no reason to trade (so daily trades on the pool = 0).
@@eJuniorA2 yeh, i agree, is more risky... the apr/apy have to worth the risk. I personaly take this risk on pairs like bnb-eth, btc-eth and bnb-btc, because I believe the pumps and dumps will be correlationated between this 3 coins
So there's one thing I dont understand and I have two possible answers and want to know which one is the right one. I add liquidity to the next pool. 50/50 pool of ETH/USDT If I provide 10 ETH at 2k and ETH goes up to 4K, the other coin is USDT so it doesn't vary. If I withdraw once ETH hits 4k I'd be receiving 5 ETH. If I had held in my wallet i'd have 10 ETH at 4k instead of 5 ETH at 4k. Or This whole concept I explained above is wrong and I wouldnt get half my coins but instead I'd receive my coins minus the impermanent loss percentage which in this case of a coin going 200% up would be 13.40% of impermanent loss
Too many people are talking and worried about impermanent loss and we should be talking about exposure risk associated with shitcoin LPs. Glad thats the first thing you mentioned.
Some rules of thumb that helped me when it comes to IL:
-symmetrically enter if you are bullish on both assets long-term, choose a deep pool to reduce slippage fee
-do not assymetrically enter with the asset that you believe will outperform
-assymetrically enter with the asset that you believe is going to underperform
-do not enter pools with speculative / volatile altcoins
do you consider matic/polygon to be volatile?
Chz volatile :(?
This is so helpful. Would you mind clarifying one thing though? When you say “ASYMMETRICALLY enter with the asset you believe will outperform”, do you mean:
A. add MORE of the strong token in relation to the other (ex. 2 ETH + 1 shitcoin)
B. add LESS of the strong token in relation to the other (ex. 1 ETH + 2 shitcoin)
In other words, asymmetric in relation to what? Thanks!
@@yungo i am not a big fan of sidechain but I think MATIC's gotten pretty big so not as volatile
@@derickyyy assymetric meaning that you enter with only one asset, not both. Some protocols allow you to do this (eg RUNE, BNT)
So basically invest in LP pairs you believe in and stay in it for the long term since most of the rates are calculated in APY
Exactly.
But since upcoming uni v3, u must pick liquidity range i hate that
I think of LP as a strategy similar to grid trading: buy low and sell high done through auto balancing. Even better, LP earns transaction fee and sometimes liquidity mining reward on top.
Can you share some strategies
Yes except it is not YOU who decides when to buy or sell. It is the LP drainer.
The AMM
The thing is that while HODLing both 50/50 gives you diversification, impermanent loss goes up as one of the assets underperform. You are guaranteed to be on the losing side of any sustained move in either direction as the position is rebalanced.
This is a good point. So just gotta take into account APY, if they offset the cost of IL
Yes this is what I’m finding even with WBTC and ETH pool even those these assets are closely correlated
Essentially, you got to pick 2 good assets that will BOTH perform. If you pick two bad ones, you lose on both sides in real value terms. Obvious. However, less obvious is the fact that if you pick one good asset and one that underperforms over the longer term vs. the other, you will continue to suffer impermanent loss, most likely in excess of any fee gain.
Most importantly, Crypto performed due to ultra low interest rates. With rates high (and real rates positive), there is no good reason to hold an asset that doesn't generate income. So crypto will generally underperform until this dynamic changes (Fed reverses policy). So, while this is not financial advice and you should DYOR, I'd say people are better off putting their money into a basic savings account (insured by FDIC and earning a safe and generous 5% interest) and wait out the current financial environment. If it changes, crypto might make sense again and that's the time to deploy your (increased) capital.
Great video and finally an honest disclosure on IL and the minimal cost vs the yield/returns/ROI you can receive.
@Justin Bram, I don't even know how many videos I've seen and was still confused on the concept. You made it super clear. Thank You very much, you are awesome!
Thank you so much bro!!!! I’ve made so much more locking in my returns with fees than buying, holding and losing out because I keep waiting for more and end up losing because massive sell offs in the past
Great Channel my Guy! It's somewhat sad that you only have 5,000 subs, you deserve much more
Because most of the subs go to fake gurus and FOMO creators. Logical and informative people like Justin don’t get much hype.
Yes this is true. But it’s a month later and we’re almost at 10k!
Hey Justin. Thanks for the clear and concise explanation + all those additional links. Really enjoy watching your vids for some weeks now and what a bummer I did not found your channel earlier. Keep it up for us. Much appreciated!
Thank you for the fantastic video. This made me think of the impermanent loss from another angle. Most articles make it look like something one should be afraid of, but in a way, it's a good thing. Now I think of it more as a hedge.
Good video but that dog is way to cute to be in a serious video distracted me 5 sec in 🤣🤣 keep up the good work man 🙌🏼😉
Great video Justin. There is always a friend that says my 2 assets are up 10x and 5x. But I lose $100K due to IL. People are pessimist by nature and these guys wont find happiness anytime soon.
Man, your videos are some of the best around.
100%
This was very good. Great simple explanation
Thank you so much. That is exactly what I was looking for. I liked and subscribed :)
Unless you enter a stablecoin LP pair, IL is inevitable. The hopes is the LP rewards/APY% will make up for the loss so you are at a net gain. The best scenario is you get out of a LP contract at the same price you went in or both pairs pump relative to each other. It's a risk/reward descision.
Love this, especially how you backed your argument in traditional financial models. Thanks for the video!
best video i ever seen about IL - easy to understand! On average How long do you hold positions - a week, two weeks?
BEST BEST BEST EXPLANATION. Great job Diving deep i love it. I'm currently providing liquidly for Sandbox with a Matic pair and rn they have about a $94 M TVL W a 160% Apr. No impermanent loss because although the coins went up from the time of stalking they're pretty equal in value comparison.
What a great perspective, I hadn't bought ETH because I thought it was too expensive... but I'm getting exposure it anyway. 😁
Great video (and cohost)! Thank you for doing this topic. The only time I really consider pl is when I am wanting to accumulate a particular coin, like in a down market, I wouldn't want to pair it with something that would go down further, or I would lose some of those coins when splitting the lp.
I generally agree that impermanent loss shouldn’t be the primary risk factor to consider, but the one exception to this is when there’s an extreme price movement (such as an asset potentially going to 0) that could wipe out your entire position due to the mechanics of the LP. That’s the one scenario in which your impermanent loss is going to become catastrophic. So a recommendation for super speculative assets might be to just hold, or single stake.
Yes agreed. Good point. I don’t enter pump and dumps or purchase tokens that have a high chance of going to 0 (or cover them on the channel), so I don’t worry about it and didn’t mention that. Great addition, though!
That's why you have stable coin pair for those who are getting started.
@@JustinBram how about you joined a good project in it's early stages and pair it with Matic for example, but your new coin goes 20x etc eventually - does it mean I would lose 20x the amount of new tokens in that pool and would end up back to same money i have invested, even if that coin made 20x in price? Thank you
when i calculate my current IL, it's 47%
currently in armor/eth 50/50
Does that mean if i was to withdraw i would recieve an extra 47% in armor and 47% less in eth?
Isn't holding a single stake the same risk if that Asset also goes to 0
This was great info, thank you so much! I liked and subscribed.
Great video! It helped me a lot to understand the issue, and also confirmed my thoughts and guesses.
Great video! Thank you
Great video, provides more clarify on IL. Thanks Justin!
Great breakdown, mate. Quality content 👍
When you are providing liquidity, how often are the assets in to pool rebalanced? If you have a lot of volatility on a daily basis, doesn't the rebalancing effectively give you significant losses? So, for example.. you provide liquidity for SOL/RAY. Ray takes a 30% dump, Sol drops 10%. Wouldn't the pool sell Sol and buy Ray? Then when Ray starts back up - relative to Sol, wouldn't the pool sell Ray and buy Sol, effectively capturing significant losses in the Ray token?
Excellent video thank for the clarification on Uni V3, I have some liquidity there doing nothing with pair TRU/ETH, a disaster. But on the other hand I have ETH/ALCX on Sushi and at the moment its a triumph .
What happened with TRU/ETH? Was this on Visor?
@@JustinBram Well thanks for make me search for Visor, I did not know that it existed 😅. Anyway mu problem is that I entered to that liquidity pool when TRU was like 90¢ , now is 26¢ plus my range on V3 was not wide enough and now the impermanent loss is like 75% and I’m not receiving any fee.
That’s not impermanent loss. That’s the pool loss
Did you watch the video?
@@JustinBram oh! ok I must be confusing the terms, apologies. And yes saw the whole video.
Awesome Vid! Actually gave me a positive feeling when dealing with this situation. I entered the mSand-Matic LP and had no idea about IL upon entering. Then I heard some horror stories about LP pools that suffer from IL. But I entered this position feeling extremely confident on both matic and sand. So If they both go up then I should be ok right? I was going to hold them long term anyways so I figured why not pair them together. Also the APR is incredible! Thank you!
@ the 5:15 mark, that made so much sense. I wouldn't be buying the pairs I'm looking at anyway. Now, I could have exposure to them, plus collecting fees, if I have a little impermanent loss, well, at least I'll have gains in those coins I would have never been holding. I'm still waiting on the Russia/Ukraine and the Mar 10 inflation report and Mar 15 Fed meeting b4 I do anything. Things could get very bearish. Can't time the bottom but the bottom is great for LPs I think. I'm still learning.
Great video and perspective - thanks!
Glad you enjoyed it!
I think a bigger worry is pools that close. If you have some very speculative coins in an LP pool and you can wait it out you can recover your loss, but if the pool closes you are in trouble.
Nice presentation explaining the meaning of impermanent loss. Comparing impermanent loss vs overall portfolio gain/loss is the correct approach to view this type of investment. Thanks.
Yeah it would be nice to have an overall formula to at least be able to see setting this out.
But you don't factor in opportunity cost if you only consider gain/loss
God Bless you!
well done. love all of urs
Thanks!
Love your content😀Keep up the good work
Great summary!!!
Finally impermanent loss makes sense. Thanks for the great video!!
This is the best video on impermanent loss out there
Nice perspective! I think when ppl see the word "loss" then unconscious think they are losing money. Actually IL is a relative loss.
I think as long as you are overall making money even if the impermanet loss offsets your APR by a significant amount. If you can invest in something and always be making money you should be satisfied. Seeing APR's of 150-500% obviously I expect some impermanent loss but just say once you take into account impermanent loss and I make 50% on my investment which you could compound back I think that is still kickass and well worth it! To me that still seems too good to be true!
Great content, impermanent loss can be a huge factor hindering liquidity miniers success. Since Grizlyfi reduces impermanent loss and ensures stable and predictable income for investors, you should definitely give it a look and maybe create a video about it.
Thank you man extremely insightful
I like your video and mostly agreed with your explanation here, but I think you missed some nature of AMM position. By the rule of AMM position, AMM LP hold more asset that people in the market didn't want to hold. For example, if I hold X token and ETH by 50:50 at the beginning, and people in the market don't want to hold X token anymore and dump them to the AMM LP, then LP have to swap all his ETH to X Token. And Price of X Token will be tanked.
Efficient frontier of modern portfolio assume that people hold fixed portion of each assets all the time, so there's some difference in AMM case. And as you already said on the video, If two assets in AMM position is highly correlated, then effect of decreasing volatility in diversifed portfolio is really small.
Justin the man but doggo in the back the real star of the channel
Great video, have one question.
Do you get back the exact number of tokens that you put in? Ex. Eth/Dai
Would you receive back the same amount of those two that you put in originally?
No, you don’t receive the same amount of each back. That’s what the impermanent loss is
I think it's still important to consider as per the last bit of your video that you lose more when the asset drop due to IL. You mentioned diversification between dai and eth, but if you were to compare strictly to holding dai and eth, your IL would still cause you to lose more. So with that said, I think IL should still be a consideration factor, if you are holding assets that you are not willing to hold for the longer term. Worst case is if you draw out your LP when the asset drops, incurring high IL and farm/swap fees weren't enough to cover the IL.
"your IL would still cause you to lose more."
Yeah but you've got to remember you made $$$ by doing the liquidity provision. So how much did you net, and is it enough to offset the loss or not?
Thanks
The key is to find the coin with solid fundamental to provide LP in the first place. Otherwise if one the coin goes to zero, the LP will go to zero too, just like what happened to Titan/Matic pool a few weeks ago.
Right! I don't deal with PND style coins or coins that could approach 0, so not something I discussed but definitely relevant.
The best explanation so far...
Thanks for the great video. Now i can invest without worrying about impermanent loss! Now if platform shuts down and doesn't provide an option to withdraw tokens then I could have impermanent loss and it is crypto so even a big company can rug pull
Thank you Sir. very well explained.
Superlative breakdown
awsome video. thank you so much
Good point, after all impermanent loss becomes permanent when you withdraw.... or if one of your coins goes to zero.
Thanks for this.
Thank you!
Im confused about this. What if the fiat value of both coins goes down and I withdraw my LP? Say Coin A is worth $1.00 when I deposited LP and Coin B was 0.50. So, I put in 50 of coin A and 100 of coin B. Then, the value of both went down. Coin A by 10% and coin B by 30%. When I withdraw, are the amount of coins A and B I get back equal to the number originally deposited (100 and 50) and just the total fiat value is different? or would I end up with more of coin B than initially deposited?
You will have more of the coin that went 30% down and less of the coin that went 10% down, compared to the moment you put them
Great video.
I'm from Brazil
I have a question, that loss that you're calculating is just in a specific time frame however if you take in consideration compounding then you'll have a bigger loss, it's like a leveraged etf like a 3x s&p for example, when the s&p goes down for example -1%, you have a loss of -3% however to get back your loss the etf has to go up 3.1%, I think the same applies here, you're impermanent loss is higher if you consider compounding, but I'm not exactly sure
Let's say I like MATIC/USDC and I want to be in this pool. What if you pick tighter ranges to gain more in fees (let's say looking to gain 8% a month in fees). In this case, you might need to rebalance once a week or maybe 2 times to keep that APR. Wouldn't that eventually wipe out all the capital you invested if you keep rebalancing?
Seems your beautiful dog disagreed with you; she quits the screen 😊
Thank you for this great insight! 👍🏽👍🏽
U used balancer calculator which is know as a dapp that covers impermanent loss right? Would that have changed if used a sushi calculator for example?
Would be interesting to see a video topic about farming LP tokens, how can most of the vaults have so much more apy than the liquidity pool itself?
In the example you gave about BTC and ETH - you didn't mention how the accrued fees could make up for the 5.xx% impermanent loss. Is that how to look at it?
yes, and the other opportunities you get when you LP
Hella, is it a good strategy to have always one stable (ie usdt / usdc) as part of the LP when providing liquidity? Thank you.
It will make you always go up 50% or down 50% relating to dóllar. Like, a token costs 100 dollars, you make a 1-100 lp, than the token go to 400 dollars, in the pool you will have 0,5 token and 200 dóllars, totalizig 400, but if you have only hold it, you would have 500 (400 + 100), dont know if i'm clear enough
Nice vid! I would like to hear your thoughts on the Vesper Finance protocol
IL is like selling your winner in order to buy more of the loser. It's only worth it if the trading fees make up for that underperformance.
In your uniswap v3 video you expressed your view on impermanent loss. You recommended a range for liquidity on eth-usdc of 2000-3000, this tight range magnifies your impermanent loss by just over 10x. At this level it is the most important factor in determining if your lp provision is profitable. Eth and usdc are not correlated assets.
If you provide liquidity on v2 in correlated assets il is not a big concern. If you provide liquidity on v2 in uncorrelated assets it is some concern. If you provide concentrated liquidity in v3 on uncorrelated assets it is of great concern. ‘What is impermanent loss and why you shouldn’t care about it’ is a generalisation that is wrong.
Glad you could provide feedback in the Discord and that we could discuss and come to an agreement! Thanks again!
hey justin, would you mind doing a separate video for saddle finance eth staking?
thank you
Thanks for the video! Hi would an aETH/ETH liquidity pool be worth it?
Great video
Why the role of tx fees is not given importance.. Seems a lot of money is lost when you get in and out of a pool
If one token drops by half and other one increases by half then that is entire thing gone, no?
hi , thanks for your videos , Maiar is lunching the dex soo and there is a egld -mex pool would it be risky to go in full blast at the beginning and there pull out some of the liquidity ? when is the best to pull out of a liquidity ?
Let's say i provide liquidity with 1 eth and the price of eth goes down, would i still have 1 eth after removing my liquidity?
2:00 but how do you determine if btc has increased 2x more than eth? If btc / eth chart goes from 0.003 to 0.006 or to 0.00015 ?
In this case, the 2% demonstrated is denominated in the ETH/BTC ratio isn't it? (So part of that loss is ETH @ say $3000, and part of that loss is BTC at say $45000.) Doesn't that mean as it could be significant in fiat terms?
So what happens in for example. ETH/USDC LP pool. When ETH goes up 200% - 500%?? The stable coins can never change.
I’m not sure why you would provide the liquidity on any pair with a stable coin? It only seems to give massive impermanent loss if the other coin moons
The point in PL with a stable is that if eth goes down, you lose less money, and if go up, you win less money, PL with a stable is like a protection and to earn the fees
Dai is one thing, but whT about something obscure like the psi coin on nexus? Its value halved after i started
The longer your providing liquidity.. the more fees accumulated, The less risk impermanent loss will cause making less then just holding the original amount? This is correct yes?
I have noticed that from day to day the amount of tokens can be more or less. If the token goes up by 10x do you get back less tokens because it has gone up? Why would the amount of tokens change?
Chewie!
so i want them to both go up in stereo ideally, yeah?
I still don't understand so if the price changes do i lose my coins like forever
Does it matter if you love both coins in the trading pair and they have huge liquidity on ONE exchange??
Im in 1 thats 406k% only have like 30$ in it but are you telling me token could go to 0 and id still get 406k% of my original position? Im brand new to lp
if the yield generated is greater than the impermanent loss, you make more money LPing vs HODLing
Is 9000% APY a good yield?
@@0xiliyan where plz ?
still trying to understand this, so if it's eth/usdc pool and the value of eth drops the pool will auto balance the pair when the price changes?
Cool 😎 I learn a lot 🍉🙏🍉
With defiplaza impermanent loss is almost nonexistent and the fees are 1/3 that of uniswap!
big if true
Diversification typically doesn’t work unless there are more than 30 assets.
You should check out the linked data and let me know what you think! It really kicks in quicker than you’d think.
This is why I dont agree: If any of the assets in que liquidity pool goes to zero, your whole portfolio goes to zero. So row does your risk decreases if its actually increasing?
If you had all the cryptos in the market inside a single liquidity pool your portfolio would pretty much value zero overtime.
dtflllll lmaoooo make sense
The point is exactly to PL only with coins you have faith in, like the pair btc-eth, never in coins that can easily go to 0
@@C0IDl But you are still increasing your risk noneless. If you own ETH + BTC instead of putting them inside a liquidity pool, you have lower risk.
You are always increasing risk unless you find 2 perfectly correlated coins (1:1), in wich case they are effectively the same coin, and there is no reason to trade (so daily trades on the pool = 0).
@@eJuniorA2 yeh, i agree, is more risky... the apr/apy have to worth the risk. I personaly take this risk on pairs like bnb-eth, btc-eth and bnb-btc, because I believe the pumps and dumps will be correlationated between this 3 coins
good video
What if first day coin A goes up 10% and coin B 0% AND second day coin A 0% and coin B 10% up? Is there happening impermanent loss?
In the first day, you will have impermanent loss, in the second, everithing go back normal
So there's one thing I dont understand and I have two possible answers and want to know which one is the right one.
I add liquidity to the next pool.
50/50 pool of ETH/USDT
If I provide 10 ETH at 2k and ETH goes up to 4K, the other coin is USDT so it doesn't vary. If I withdraw once ETH hits 4k I'd be receiving 5 ETH. If I had held in my wallet i'd have 10 ETH at 4k instead of 5 ETH at 4k.
Or
This whole concept I explained above is wrong and I wouldnt get half my coins but instead I'd receive my coins minus the impermanent loss percentage which in this case of a coin going 200% up would be 13.40% of impermanent loss
In this case, you would double the initial usdt, and halve the initial eth, so yes, you would receive 5 eth, but double the initial usdt
one token in LP goes down - LP hedges the loss. one token in LP goes up - LP buys other token with increase. Not bad at all.