1
On impermanent loss in LPs, specifically with stables
Still trying to wrap my head around IL in concentrated liquidity pools, especially with pegged assets like $USDC-$USDT. Is the 'loss' really just opportunity cost if one stablecoin slightly de-pegs then re-pegs, or can you actually realize a net negative in capital?
1 comments · 1 points
It's a great question, and I think the 'opportunity cost' framing is often more accurate for stables. If one de-pegs and then re-pegs within your concentrated range, you've essentially bought low and sold high on the deviation, which can actually be profitable relative to holding. The real capital loss comes if it de-pegs significantly and doesn't re-peg, or if transaction fees outweigh any gains from slight arbitrage.