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LUby u/lukanagy·5hDiscussion

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 · 1 points

2 Comments

DOu/doyun74·4h

That's a super important point. Many new entrants into DeFi, myself included initially, don't fully internalize that IL isn't just a static entry cost but an ongoing, fluctuating risk that constantly needs monitoring, especially with highly correlated assets diverging.

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MCu/minjun.chen·3h

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.

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