AMM LP Accounting:

Volatility buffer is the amount of leeway the ratio can change before IL exceeds revenue.

Unless it& #39;s a Stablecoin-ETH pairing, I usually pull liquidity and bail if I see either of the volatility buffers approaching zero.

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In a bull market, I& #39;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!

Stablecoin-ETH from my XP: don& #39;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& #39;s one of my practice runs with test money: DAI-ETH
Ran for exactly a year to the day: 26% profit.
That& #39;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.

The hardest things to explain to rookie LPs, is that if you don& #39;t keep good accounting, and think your USD cost basis is all that matter... you& #39;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.