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What happens in the "opposite" scenario where token A increases in price and token B remains the same? What happens if both tokens increase in value? (Can't find the answer anywhere)
Hey, would you be able to explain how APRs are calculated/executed for LP providers? Some of those APRs listed are insanely highly, like 1000% APR. Is that too good to be true, and how do the LPers accrue this APR? Through tokens? Through the coins they put into the LP?
I've already gone through two videos on your channels and both explained to me difficult concepts which I failed before to understand by reading about them. Thanks for that. Really good ratio of knowledge shared vs. video length :)
I guess the key lesson is that if you are providing liquidity, do so in assets that are expected to maintain their relative value over the long term if you don't want to suffer from impermanent loss.
but you're missing the point of the LP tokens. Say you are doing a SOME TOKEN/DAI pair.. and providing the liquidity. DAI is a stable coin.. so even if SOME TOKEN goes up 500% in value, which would give you impermanent loss of about 25% of SOME TOKEN. But you also received the LP token for that pull and are farming more of SOME TOKEN at a 2000% APY, the additional SOME TOKENS you are earning and able to harvest, far outweigh the impermanent loss.
How do you know that they’re going to maintain their relative value? You don’t. Especially if it’s two assets you’re providing - making it that much challenging. The incentives I believe and the lack of fear can help - just don’t know anyone knows if anyone knows anything tbh
@@gnarxy If you see this comment can you look at my question I posted up top :), I think you just answered my question. Is it fair to say if the APY is higher than the Impermanent Loss, and assuming the Assets didnt drop to 0. Profits will be made?
True, except crypto is - by it's nature - so volatile that it's almost impossible to predict. Stable coins might be the only ones that have any level of stability. Pesonally I think for smaller investors you're actually better off just staking coins.
Hi, Finematics Team. How are you doing? Guys please, allow automatic subtitles in your videos. Maybe it will help a lot of others people, subscribers of your channel and me as well. As a no-english speacker even though been fluent in english, subtitles always help...thanks and congrats for your excellent work here. Cheers
Wow I’ve just found these videos. You explain everything in a succinct way with all the pertinent information. Thank you! It should help a lot of people.
I never knew your liquidity can actually appreciate in value other than fees if both assets rise in price, I always was under the assumption best case scenario you can pull out 100% of what you put into your LP + fees, worst case loosing value if your token pairing decreases in value + fees.
in non-stablecoin pools, yes, if both assets increase in USD price, you will pull out more USD value than you provided, and depending on the IL (how much their pump differed), come out also with more of eachcoin due to fees.
LP Impermanent Loss in a nutshell, as I think i got it: Both go up - small loss ? One goes up - medium loss ? One goes down - high loss ? Both go down - highest loss ? Both return where they were - no loss ?
Thanks for another great video. Would love to see another video on impermanent loss when it’s a non-stablecoin so two volatile cryptos. And any tips on managing that
Great video! I am currently investing in a token which I expect to blow up soon (x10 and above). I thought I am smart by providing liquidity because I would gain fees on all the buys coming in but now it looks like there will be serious impermanent loss. Time to get out of the liquidity pool :D
Thank you so much for this great content. I am still trying to find out what could be risks for providing liquidity for a pair like USDT vs USDC... Of course excluding any smart contract bug or any hacks because those risks are just inherent to everything in crypto.
The main risk is that one of the stable coins can lose its peg to the US dollar. USDT, for example, is not completely transparent, so we don't exactly know if they have all the assets to cover their outstanding USDT balance.
There are none. Only risk is a bank run which won't occur until something really bad happens. But then all your other crypto will most likely be worth nothing anymore either 😉
This channel is really awesome. I am new to Yield Farming - Providing Liquidity, and I hope to learn more from you! Anyone who can recommend me the best way to start?
Very valuable explanation! I have been wading through tons of materials where the authors themselves did no seem to understand the underlying concepts and just spit out some gibberish
I got hit by IL on the YOK/CKB 50/50 pool. One simple strategy against IL would be to provide LP to a value you are OK losing and take out any additional profits earned from yield farming weekly or at a frequency of your choice.
If both of your tokens crashed equally, you can either HODL your LP tokens until the prices are back up, or take them out. But you might as well park them until they get back up, unless you expect them to get back up unequally. Basically, you want to take them out when the ratios have returned to what you started with, unless the fees have been *really* good to you.
It really boils down to if you believe the tokens will increase in value in the future. Let's put staking aside: If you wouldn't keep your money in an asset, it's probably a good idea to cut your losses and move forward somewhere else
Do you mean how the EPY is calculated or how the interest is automatically applied? The second is tied to the smart contract, to simplify, all the rules of 'interest' automation are programmed and propagated in the ETH blockchain. Hope that helps
So to avoid impermanent loss, is it only advisable to be a LP when the markets are relatively stable? Presumably when there's high volume and high volatility, there's more to be gained by being a LP, but also more potential for losses?
Hi, I wonder how did you learn this things, would you mind to point me to some books or other resources? That would be much appreciated. Anyway great video🔥, continue with your journey.
This is my first run of the video so im still hazy, will rewatch. But if you miss out on profits of a token going up in price, does that mean youre also safe from the losses of the token price going down?
Stake your LP tokens in a farm, the APY should cover most of your impermanent loss, unless your dealing with high volatile tokens, stick to the main pools generally,
Could you ever have the opposite? Impermanent gain? Such that you receive more of the coin that is worth more in value and less of the lesser value coin after providing liquidity?
So to sum up, To avoid impermanent loss, one has to choose a stable coin, like USDT, and a coin (which you prefer) that you know is volatile but would eventually goes back to it's original price?
Brilliant Video which helped a lot. So with Farming, and providing liquidity, volatility results in impermanent loss. De-risking this; stick to pools with single assets although the APY is lower. Can you have impairment loss in single pools? Or can I continue with lower APY; and if I exit, keep the original investment (Number of Tokens)
So if I'm really bullish on any coin it doesn't make sense to provide liquidity for it right? Cause of it goes up I'll lose some of it? But what about rewards for staking lp tokens, in what cases do they make up for the loss?
Very solid and analytical video. So in technicalities it would be lot safer to invest in stablecoin pairings right? Due to the nature of prices fluctuating lot less.
if the value of one token changes relative to the other, impermanent loss will be incurred. If both tokens increase in value equally, their value relative to each other does not change so impermanent loss does not occur.
Thanks for great explanation. I know I'm leaving a comment on 3 year old content. But, does anyone know if the other way around also happens? When you terminate the staking, can you have impermanent gain instead?
Beautiful video thank you ♥️ If i am taking part in a liquidity mining pool with A/B, A and B being highly correlated, the risk is highly minimised right? if asset A grows 1000%, and asset B almost the same, then no impermanent loss if i got it well
"Impermant Loss" is such a vague and unhelpful term. Any investment in shares, commodities, etc experiences impermanent loss - i.e. a decrease in value since purcase that is only crystalised if you sell your holding. Something like "price divergence" would be more relevant and specific
Yes but the example doesn't tick for me. I put 20 ETH and I have 19. something? Since I take %s on both coins I should have more of both in time. Not less.
In binance liquid swap you will earn bnb for liquidity mining and transaction fees. What currency are transaction fees? Which one of the 2 currencies you added to the pool?
