Is the Impermanent Loss Calculation Different for a Stablecoin Pair Compared to a Volatile Pair? ⎊ Path

Is the Impermanent Loss Calculation Different for a Stablecoin Pair Compared to a Volatile Pair?

The fundamental calculation for impermanent loss (IL) remains the same: it is the difference in value between holding the assets and providing liquidity. However, the magnitude of the potential IL is vastly different.

Since stablecoin pairs are designed to have minimal price divergence, the IL calculation typically yields a much smaller number. The formulas used for stablecoin pools (hybrid/stableswap) also modify the price curve to reduce IL within the peg range, making the calculation more complex in practice.

Define ‘Bonding Curve’ in the Context of a Token Launch and Its Relation to AMM Formulas

What Are the Mathematical Formulas Used to Calculate Impermanent Loss in a Concentrated Liquidity Position?

What Is the Impact of a Stablecoin’s Bid-Offer Spread Compared to a Volatile Altcoin?

How Do Different AMM Formulas, like Constant Sum, Affect the Severity of Impermanent Loss?

What Factors Determine the Magnitude of Impermanent Loss for a Liquidity Provider?

Does Using Futures Contracts Instead of the Spot Asset Change the Principle of Delta Hedging?

Can a Stablecoin-to-Stablecoin Liquidity Pool Experience Impermanent Loss?

What Alternative Formulas or Models Exist for Predicting Impermanent Loss under Different Market Conditions?

Glossar

Stablecoin Pair

Pair ⎊ A stablecoin pair consists of two assets designed to maintain a stable value, typically pegged to a fiat currency like the US dollar.

Impermanent Loss Calculation

Divergence ⎊ ⎊ Impermanent loss calculation, within automated market makers, quantifies the difference between holding assets versus providing liquidity; it arises from price fluctuations relative to the initial deposit ratio, impacting portfolio value.