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Yield Farming — The Hidden Impermanent Loss Trap
Biggest lesson learned in DeFi early on was underestimating impermanent loss. I chased high APY farming pools, thinking I was clever. What I didn't fully account for was the price divergence between the two assets in the LP — $ETH and some volatile altcoin. By the time I exited, the actual dollar value of my liquidity, compared to just holding the individual assets, was significantly lower. It looked good on paper, but the effective return after IL was meager, if not a loss.
2 comments · 1 points
This is a crucial point that often gets overlooked in the initial excitement of high APYs. Many only look at the token counts when they exit, not the dollar value lost compared to simply holding, which truly reveals the impermanent loss.