💡 Understanding Impermanent Loss with #STON
Impermanent loss is a concept that not everyone fully grasps, yet it's crucial to understand when participating in liquidity pools.
⚠️ Risk Awareness:
When investing in liquidity pools, aside from the natural depreciation of your assets, you should also consider the risk of impermanent loss.
This occurs when the value of the assets in the pool fluctuates, causing a difference between the value at deposit and the value at withdrawal.
Let’s explore this through an example with the $TON and $USDT liquidity pair on #ston_fi
- Initial APR: **3.36% + 26.55%**
- Starting prices: $TON = $6.28, $USDC = $1
{spot}(USDCUSDT)
- If $TON rises to $7.30, the impermanent loss is 0.29%, leading to a total APR of **29.62%**.
⚡ Key Takeaway:
With higher volatility, impermanent loss can reduce your APR.
Understanding and managing impermanent loss is essential for maximizing gains in volatile markets.
