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AMM LP Accounting:
Volatility buffer is the amount of leeway the ratio can change before IL exceeds revenue.
Unless it's a Stablecoin-ETH pairing, I usually pull liquidity and bail if I see either of the volatility buffers approaching zero.
#uniswap #Ethereum $ETH
Volatility buffer is the amount of leeway the ratio can change before IL exceeds revenue.
Unless it's a Stablecoin-ETH pairing, I usually pull liquidity and bail if I see either of the volatility buffers approaching zero.
#uniswap #Ethereum $ETH
In a bull market, I'm actually more worried as an LP about IL than I am in bear markets!
In bear markets, I just sit and collect fees waiting for it to go back up again... bull markets I still get $$$, but IL is devastating!
In bear markets, I just sit and collect fees waiting for it to go back up again... bull markets I still get $$$, but IL is devastating!
Stablecoin-ETH from my XP: don't worry about IL, the fees are consistent, volatility favors me, and fees will always catch up or exceed IL on a bigger timeframe.
Here's one of my practice runs with test money: DAI-ETH
Ran for exactly a year to the day: 26% profit.
That's 26% more DAI, 26% more ETH, vs HODL.
Ran for exactly a year to the day: 26% profit.
That's 26% more DAI, 26% more ETH, vs HODL.
LPing for YFI-ETH is a PITA.
Just when I thought I had built a big enough volatility buffer to last forever, YFI goes from moon to JFC territory... I had to pull liquidity 4 times.
I still leave a trace amount in there for purpose of data collection.
Just when I thought I had built a big enough volatility buffer to last forever, YFI goes from moon to JFC territory... I had to pull liquidity 4 times.
I still leave a trace amount in there for purpose of data collection.
The hardest things to explain to rookie LPs, is that if you don't keep good accounting, and think your USD cost basis is all that matter... you're going to take a dollar for every three the market gives you.
The liquidity depth on YFI-ETH shows how many LPs are bad at math.
The liquidity depth on YFI-ETH shows how many LPs are bad at math.
