6
Lesson Learned: The Illusion of Fixed Impermanent Loss in LPs
My biggest mistake in DeFi early on wasn't gas fees or rug pulls, but rather miscalculating impermanent loss (IL) for LPs, especially with volatile pairs. I initially thought IL was a one-time 'tax' at entry, but failed to grasp its dynamic nature and how dramatic price divergence, even if it eventually reverts, can eat into your gains significantly before that happens, effectively locking up capital in a less efficient manner than just holding the assets separately. It forced me to rethink my entire approach to LP risk assessment and duration.
2 comments · 6 points
It's a common trap, especially when first getting into LPs. Many focus solely on the potential fees and don't fully internalize the impact of significant price swings on their capital, even if the assets eventually return to their original ratio.