Scaling up DeFi yield farming: How do you manage impermanent loss risk as capital grows?
I've been playing around with a small amount of capital in various DeFi yield farms, mostly on stablecoin pairs or single-asset staking, which feels relatively safe. Now that I'm considering allocating a more significant portion, say $10k+, to LP positions with volatile assets, the prospect of impermanent loss is starting to feel a lot more real. It's one thing to stomach it on a few hundred dollars, but with a larger sum, the potential drawdowns are concerning. For those of you who have scaled up your DeFi farming, how do you practically manage impermanent loss risk? Do you focus purely on low-volatility pairs, or are there specific strategies, like hedging, that you employ to protect your principal? I'm trying to wrap my head around a more robust approach beyond just 'hoping for the best' when it comes to volatile LP tokens.
Ah, the classic DeFi dilemma: the more capital you throw at it, the more the 'impermanent' loss starts to feel rather permanent. At $10k+, you're basically giving the market more principal to play with, so the risk isn't just a rounding error anymore, is it?