💧Want to earn LP fees while minimizing Impermanent Loss?
Here are 2 simple tips anyone can apply 👇
1/ Stablecoin/Derivatives Pairs
IL only occurs when the exchange rate between two tokens diverges from the rate when you added liquidity.
To reduce that risk, consider providing liquidity to pairs with stable exchange rates - like stablecoin/derivatives pairs - which typically stays close to 1:1.
🔸The trade-off? These pairs generally offer lower rewards compared to more volatile pairs.
2/ Correlated Pair
The more stable the exchange rate between two tokens, the lower the IL.
IL tends to be minimized when both tokens move in the same direction (both rising or falling together) and with similar volatility.
📈 For example:
You observe that BTC and ETH often move together - both rising or falling at the same time. And the ETH/BTC rate stays sideways within a specific range for a long period. So, that makes ETH/BTC a potential LP choice with lower IL risk.
*Example is for concept explanation only - not financial advice
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