I keep trying to better understand the impermanent loss risk

Question

I keep trying to better understand the impermanent loss risk

associated with swap pools; it's been said that current yields on kava swap make up for potential IL, but I assume there´s a point where an unlikely giant increase of the prize starts erasing the benefits of the high yields rite? taking usdx:hard as an example where yields have varied from 200-250% (assuming it stays in that range), is a 4000% increase in hard prize a point where the high yield rewards stop compensating for the IL incurred?

#blockchain #cryptocurrency #english #kava

0

24.11.2021

2 ответов

15 просмотров

CryptoDaz (Darren)

If a token was to pump by 4000% (40x) then the value of your assets in the pool would be 69% lower than if you hadn't supplied liquidity You can see the effect using a calculator such as this. If you have provided liqudity you generally don't want the asset to changes massively in value and is a risk you take. In most cases over a long period the SWP reward yields will outweigh that loss, but over the short term it might not if the asset moves very fast, also in the longer term if the assets has pumped massively the time before the the rewards beat the IL might be longer. Worst case would be in a large market crash where the value of your assets have fallen and also the value of the vesting rewards. There are no guarantees and there is a risk that you might not make a net profit if the markets turn against you

0

24.11.2021

CryptoDaz (Darren) · Accepted Answer

CryptoDaz (Darren)

These are the impermanent losses in an standard 50/50 split AMM 1.25 times the price change = 0.6% impermanent loss 1.50 times the price change = 2.0% impermanent loss 1.75 times the price change = 3.8% impermanent loss 2 times the price change = 5.7% impermanent loss 3x price change = 13.4% impermanent loss 4x price change = 20.0% impermanent loss 5x price change = 25.5% impermanent loss

0

24.11.2021

210 похожих чатов

I keep trying to better understand the impermanent loss risk

2 ответов

Похожие вопросы