How Does a Weighted AMM (E.g. Balancer) Manage Impermanent Loss for Multi-Asset Pools? ⎊ Path

How Does a Weighted AMM (E.g. Balancer) Manage Impermanent Loss for Multi-Asset Pools?

A weighted AMM allows for pools with more than two assets and non-50/50 weightings (e.g. 80/20).

The impermanent loss is calculated based on the divergence of the price ratio and the pool's weightings. If one asset's price rises, the loss is mitigated because the pool holds less of that asset (e.g. in an 80/20 pool).

This structure reduces exposure to the volatility of a single asset, making it useful for pairing a volatile governance token with a stable asset.

Differentiate between a “Market Cap Weighted” and a “Volume Weighted” Index

How Does Netting Impact Capital Requirements for Banks?

Does the Weighting of Assets in a Multi-Asset Pool Directly Correlate to the Share of Impermanent Loss Attributed to Each Asset?

How Do ‘Iceberg Orders’ Attempt to Minimize Market Impact on Public Exchanges?

What Is the Primary Advantage of a Weighted AMM Pool like Balancer over a 50/50 Pool?

What Are the Primary Differences between Impermanent Loss in a 50/50 Pool versus a Multi-Asset Pool?

How Does Netting Impact the Calculation of Capital Requirements under Basel III?

What Are the Trade-Offs between Earning High Trading Fees in a Volatile Pool versus Minimizing Impermanent Loss in a Stable Pool?

Glossar

Non-50/50 Weightings

Weighting ⎊ In cryptocurrency derivatives and options trading, non-50/50 weightings represent a departure from equal allocation strategies, reflecting a deliberate asymmetry in risk or reward exposure.