What are ways to hedge an impermanent loss in DeFi?
Asked 3 years ago
Afternoon guys. Looking for ways to hedge impermanent losses. Thank you kindly
Anderson Ezie
Monday, January 31, 2022
The most common way to hedge against impermanent loss currently is through LP tokens paid by the native DeFi platform, and through fees distributed by the native platform to LP providers. Most DeFi platforms pay LP providers some fees ranging from 0.30% to 0.50%. Another way to hedge against impermanent loss is to use part of te funds at your disposal to provide liquidity for stable assets alone. These assets such as BUSD/FRAX, USDC/USDT, MIM/USDC, and UST/USDT have lower risks of impermanent loss. Some protocols like Balancer offer pools with varying ratios which also reduces the impact of impermanent loss.
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