is inpermanent loss is similar to Dollar cost averaging?

Have questions about Impermanent loss.

I understand that ether the token price is up or down, total asset value will be lose compared to just hold those token.

Some articles said that LP provide is similar to Dollar cost averaging.

My question is
Will The total asset value be higher if the token price is back after token price down?

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7 thoughts on “is inpermanent loss is similar to Dollar cost averaging?”

  1. It depends on whether you “realize” the impermanent loss or not by withdrawing from the pool. Let’s assume an ETH/USDC pool. If you withdraw when ETH is lower than before, you’ll hold more ETH. In that sense, you implicitly bought more ETH. When ETH goes up after that, you’re golden. If you don’t withdraw at all and wait for ETH to be at the same price as when you entered the pool, you’ll not incur any IL and have about the same amount of tokens.

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  2. To be honest, I don’t bother with LP; staking suffices for me.I already have stable staked Kucoins and Celsius, as well as staking Altcoin like UDO for 0.35 percent daily, and I’m also on drip network

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  3. Yield Faming / Liquidity Providing is my jam…. Honestly don’t worry too much about IL and ways to minimize it if you are worried about it. I do YF quite a bit with coins pegged to one another which virtually eliminates it. Plus, you only really have IL when you sell your LPs.

    I stake a little but the returns are much lower…

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  4. Like the analogy. If both the tokens you are providing LP with are long term holds then IL should not bother you much. Coming to your question total value of LP should be roughly same as the token which went down in price had its qty increased to maintain the LP. Now when its price goes back up the qty will reduce. What value you gain is 1. Swap fee portion 2. any external incentives on that pool.

    Below are some good pools to consider with external incentives. I shared these earlier on a different post, and want to clarify that these LP makes sense only if you are bullish on those tokens. If you are bullish one of the tokens, then pairing with stable can be considered. DYOR

    Junoswap Juno – Atom. Juno- LUNA (considering RAW -JUNO after I get my RAW airdrop in 13 hours or so)

    Osmosis – OSMO -JUNO

    Crescent – CRE -LUNA, ATOM -UST

    AStroport Luna- BLuna

    EVMOS EVMOS USDC EVMOS- DIFF (this one is new and great APR, but watch out for Airdrops which might create sell pressure )

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  5. i guess it is if you pair with usdc as when ever your other token goes down in value usdc will be sold to buy the token. so i guess u can say its a dca machine

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    but then again when the other token rises that token gets sold into usdc.

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  6. It’s like rebalancing your portfolio to keep the value 50/50, so selling along the pumps and buying during the dumps to keep the values of the 2 tokens equal.

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