Yield farming lesson: The impermanent loss sting on a volatile pair
Was chasing those high APY numbers back in '21, setting up a liquidity pool on a new DEX with a $USDC-$ALTCOIN pair. The yield looked fantastic on paper, justifying the gas fees and the general complexity of monitoring it. However, I completely underestimated the impact of impermanent loss when $ALTCOIN started doing its parabolic thing. I saw the value of the pool grow in dollar terms, but when I eventually pulled liquidity, I realized the percentage gain was significantly less than if I had just held the $ALTCOIN itself and didn't touch the USDC. The high yield was attractive, but it obscured the underlying asset depreciation relative to the pair. It was a costly education on how that specific mechanism works in practice, not just in theory.
This is really interesting to hear. I've been learning about impermanent loss and it sounds like a real gut punch when you see your dollar value increase but your actual holdings diminish. Did you end up exiting the pool at some point, or did you hold through it?