How Do You Hedge Impermanent Loss in DeFi
Impermanent loss (IL) is the hidden tax on liquidity providers. It happens because AMMs rebalance tokens whenever prices move. If one asset in the pool pumps, the protocol automatically sells part of it to buy the other side. But that means users end up with fewer of the winner and more of the loser. The gap between what you’d have if you just held vs what you actually have in the pool is IL. Take ETH/USDC on Uniswap as an example. Suppose you deposited $5,000 worth of ETH and $5,000 in USDC ...
How Do You Hedge Impermanent Loss in DeFi
Impermanent loss (IL) is the hidden tax on liquidity providers. It happens because AMMs rebalance tokens whenever prices move. If one asset in the pool pumps, the protocol automatically sells part of it to buy the other side. But that means users end up with fewer of the winner and more of the loser. The gap between what you’d have if you just held vs what you actually have in the pool is IL. Take ETH/USDC on Uniswap as an example. Suppose you deposited $5,000 worth of ETH and $5,000 in USDC ...
