rekt on “impermanent loss”
You don’t loose money with IL, it’s money that you could have won but you havn’t.
Pratically, let’s compare multiple strategy starting with 1k$ in the
USDC / ETH pair and then price of ETH doubles :
- If you would have hodled 1k USDC instead you would have 1k$
- If you would have pooled thoses tokens into the pair, you would have 1k5$
- And if you would have hodled ETH you would have 2k$
What is important to realise is that this is too late. You will never win the 500$ you are missing right now. To have that money you would have needed to hodl ETH (which you havn’t).
If your IL goes back down, you might think this would be a good thing, while it wouldn’t, if IL goes back down this means that you will become poorer (simply ETH returning to the previous price), so you would have 1k$ back again, it’s just that someone that hodled ETH would have 1k$ too. (I’m ignoring the case where USDC value raises, for me only ETH can fall to reduce the IL)
IL isn’t an objective mesure nor usefull metrics and I don’t think you should base your strategy on this.