RE: Cub on a tear; tear for the bear.

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RE: Cub on a tear; tear for the bear.

edicted in LeoFinance • 5 years ago

It certainly doesn't help that most of the websites out there attempting to explain it are completely wrong. They all make the claim that it happens as a result of arbitrage from centralized exchanges which is 100% false. If centralized exchanges didn't exist (example: CUB) it would still happen in exactly the same way.

At the core "impermanent loss" is simply dollar cost averaging. Your coins are for sale, so if CUB goes x2 you're selling CUB all the way up. Obviously if you're selling all the way up you won't make as much money as if you just held the entire time. DCA lowers volatility so there is less risk but also less reward.

5 years ago in LeoFinance by edicted

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shmoogleosukami 5 years ago

I find it hard to understand when you lock in 'impermanent loss' like I just withdrew a bunch of liquidity on Cub DeFi and I'm wondering if that 'loss' gets locked in when you withdraw liquidity etc. Honestly I canb't really tell cause as far as I'm concerned the value of what I put in is largely the same as what I've taken out in $ terms anyways.

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edicted 5 years ago

It's really a grievous mistake to consider it a loss at all.
It's all dollar cost averaging.
One asset goes down, you're buying it.
One asset goes up, you're selling it.
There is no loss, it's just a less risky gamble.

Think about it like this:
Would you tell someone they lost money when Bitcoin went x2 because they didn't trade on x100 leverage?
Therefore everyone should trade on margin because you can make more money?
It's the exact same thing with impermanent losses.
They don't exist: it's just DCA (IE less risky & lower volatility).

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