Is DeFi pooling overrated compared to hodling?

\*”\**The hope is that* *the rewards from LPing will outweigh any risk of impermanent loss.”*


**Hello Everyone,**

I was thinking today if pooling in DeFi was overrated compared to hodling!

Now don’t get me wrong, i have 90% of my crypto portfolio in blue chip co-related chain LPs but I am starting to ask my self “why?”, “why did I do that”?

I’m in DeFi from almost a year now. I ended up pooling because I wanted a way to reduce volatility and earn passive income.

I always DCA, so I never bought the top nor the bottom.. I’m always in the middle.

I look at my portfolio in this bear market and I am down by 30%. I look at my APY and it has shrunk to an average of %14. I look at my expected loss if I was just hodling and it could have been 50% or more. Am I happy? I don’t think so.

You see, it just hit me that I traded potential growth in a future bull market for a mere 14% APY. A bull run could easily 2X my portfolio while my LPs could gain 50% growth only, due to constant rebalancing + the 14% APY. So I could end up trading 100% growth for just 64%, now that’s **impermanent loss** ladies and gentlemen.

I feel disappointed because I am an ex Boglehead and I should have known this. Growth stocks always win over the long term compared to dividend paying stocks – eg. dividend aristocrats – according to SPIVA statistics.

Those who are happy getting monthly dividends – with lesser volatility – end up losing over long investment horizons of 10+ years because the growth stocks end up appreciating more in value.

Take an example of Google and Pepsi. One doesn’t pay dividends and reinvests all profits back compounding the returns while the other pays dividends periodically. Study the performance of both and you’ll find out that Google will make you more money – HODL Growth Strategy- than Pepsi -Pooling for APY Strategy- eventually.

Is this what pooling is all about? losing on the long term to divergence loss? Trading growth for dividends and lower appreciation? I am utterly disappointed.

*I thought when I started that the rewards from pooling will outweigh any risk of impermanent loss*, but I don’t see it happening. The APYs of blue chips eventually go down from 30% or even 300% – when starting new on a AMM, Dapp or Auto-Compounder – to around 10% (+ or – 5%) erasing any hope of that happening.

Does anyone agree? Did anyone make money by pooling blue chip crypto from the past year?

I am thinking if the solution is *single side staking or pooling* \- with low APYs usually < 10% – or just *hodling*. And does hodling work or do you need to take profits periodically and do some swing trading?!

That’s another piece of the of puzzle that I have to figure out. Again as an ex Boglehead, I don’t see active trading winning.. passive trading usually is the winner, most of the time, provided that you have enough diversification.

What do you guys advise? Has anyone here found a winning strategy? I know there are lots of Stablecoins fans out there… could that be the answer? I hope not 😀


Hit me with your DeFi stories ….

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15 thoughts on “Is DeFi pooling overrated compared to hodling?”

  1. What you are saying is correct but i think you are missing the point.
    You don’t pool assets because you want to maximize your growth, but because it will lower volatility (on certain pairs) plus having a predictable income. Like buying a house to rent.
    On the contrary you hold your assets and not pool if you believe that it will grow in the future.

    Depending on your portfolio and situation you might prefer one or another, or both.

  2. I’ve held since 2017 and rode every up and down only to find myself frustrated when things were down. I view liquidity pools as a way for me to put my crypto to work for me all the while not having to worry about the ups and downs.

  3. I agree with your views about the stock dividends vs Growth, but in my opinion it is not a good analogy with DeFi.

    DeFi have real utility for providing liquidity for different purposes (i.e: AMM, lending…). The issuer of the rewards it is not the own token issuer, but the protocol for the utility given.

  4. I wouldn’t pool for 14% APY, better solution would be lending blue chips and borrow some stables to buy more blue chips.

  5. Pooling for me is you dont really care about the USD price of the coins you put in the pool and you dont really care either where the markets go whether up or down.
    Ideally with LP you want to have both assets that you like so IL is just really buying the dip on one side.

  6. Yes, hodling assets you think have strong potential makes more sense than LP. Best is single staking which is available for most L1 which operate on Proof of Stake. So my long term crypto PF which is Atom, Juno, Luna and few more, I stake them to secure the chain and earn 16%, 102% and 9% plus airdrops. Some I do provide LP, but most is in single staking. Only drawback of single staking vs hodling in wallet is staking requires locking your assets for 3 to 4 weeks

  7. Volatile / volatile coin LP is a bet that the valuation of the two coins will remain similar relative to each other. Unless you believe with ~90% probability that this will happen, there’s no reason to have 90% of your portfolio in these LPs.


    * Volatile coin / stable coin LP is a bet that the market will go sideways.
    * Stable coin LP is a bet that the market will go down.

    Hedging your bets is smart. 90% in any of these categories is almost certainly excessive.

  8. Remember, when you pool, you are adding up to the number of tokens you hold. Over time, you’ll realize it’s the best thing to do.

    But ofcus, it’s important to HODL credible projects. Don’t try such with memes. Lol. DIA is my top HODL and I staked this on Binance. It’s NFT too seems a great way to stack more of DIA tokens with 2000% APY.

    If you can’t bear such risk? Just stick with stablecoin staking. That way, you are less bothered about IL.

  9. I’m way up in my lp positions even though coin price has crashed. Yet I entered lp positions at the coins launching. And i avoid blue chips.
    Spent hours a day searching the internet, CT tg for newly launched projects. That were launched by people with past success. Or that had certain vc names backing them… Or that certain wallets entered

  10. I think LP most times depends largely on the both pairs and their pattern of volatility, also if the APY you’re getting is just enough to cancel out any IL faced in the process. For example, I’m currently in FUFU/BUSD LP staking. IL is less because it’s paired with a stable coin and and APY is very decent

  11. What if you considered pledging an apex asset (for example AVAX, LUNA) on a money market (AAVE, Edge Protocol), borrow a right amount of the same Layer 1 coin. Pair up with an equivalent of stables and LP it. Your appreciation/growth will come from the collateral pledge. During a bear market, your stables get DCA into the volatile coin while earnings a decent yield. To put the cherry on top, the rewards from pledging your collateral could outweigh the borrowing cost.

    Liquidation risk is minimal as your underlying collateral and borrowed asset moves in tandem.

  12. The easiest way to think of pooling is that it’s a 50/50 strategy, not a 100 strategy.

    For example, pooling in eth/USD. It’s the same as selling half your eth, and buying USD. When the price goes up 1$, you only make 50 cents. When the price goes down 1 dollar, you only lose 50 cents.

    Same for all other pairings, they balance the risk.

    In a bull market you’re better holding, you get 100% the gains. In a bear market, you’re better off pooling, since you get 50% the loss.

    In both markets, you get the apy as bonus %.

  13. Overrated to me. The only LPs I’m comfortable with are stablecoin LPs.

    I prefer single staking. Inflation is kinda a problem with that too. Perhaps Dafi super staking can help projects mitigate that. But overall, staking is still the better option to me. At times like this, I don’t like autocompounding, I want options with my rewards.


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