Consolidating BALN/bnUSD LP at a low?

Feedback, Suggestions & Questions
#1

I’m wondering if this is a thing. Are there any posts about it? Am I missing something or are my calculations off?

I’m asking because I feel many people voted against BIP14 due to worries about impermanent loss. Rightfully so; however isn’t it more advantageous to leave LP and consolidate into BALN at a low price point — making it easier to recover value?

For example, if you held:

100 BALN / 1000 bnUSD

Then the value on the way down would be:

$10 / $1 : $2000

$5/$1 : $1500

$1/$1 : $1100

$0.5/$1 : $1050

If you added to LP with:
100 BALN / 1000 bnUSD
$10 / $1 : $2000

The value on the way down:

141.42 BALN / 707.1 bnUSD
$5/$1 : $1,414.22

316.22 BALN / 316.22 bnUSD
$1/$1 : $632.46

447.22 BALN / 223.6 bnUSD
$0.5/$1 : $447.22

If you consolidate at a low of

$0.5 for 894.44 BALN, the value would be:
$894.44 @$1
$1788 @$2
$4472 @$5

OR

@$1 for 632.44 BALN the value would be:
$632.44 @$1
$1264 @$2
$3162 @$5

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#2

Yeah if you’re bullish on BALN it makes the most sense to leave the LP while it’s low, use your bnUSD to purchas BALN, then stake.

Being an LP in a token/stable pool does the following:

  • Buys the token as it’s going down in price
  • Sells the token as it’s going up in price

It’s a specific position you’re taking that many people don’t actually understand I’d say

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#3

I want to word what @AwaxJago is saying (which I agree with) a little differently and mention a pet peeve of mine regarding IL.

“You don’t lose until you withdraw” and “You don’t lose if it ends up being the same when you withdraw”.
Let me first say, those things are not untrue, but they miss the point.
If you are suffering IL (as opposed to normal losses where both assets have fallen), if you will only withdraw when they ‘become the same as when you entered’ which is a very oddly specific requirement, you are basically betting that that DOES happen. Staying in is a direct and active bet towards that thesis.
If so, there are many things you can do to back that thesis, from full on withdrawing and going twice as long, to withdrawing a bit and going a bit long, to staying in, which is partially a bet against the ‘it will go back to the way it way’ thesis.

Thats right, staying in to avoid IL is opposed to the thesis that it ‘will go back’. Because… you already suffered IL on the way down, why are you taking IL on the way up as well.
In that sense calling it ‘impermanent’ loss is a misnomer, its not wrong, but its misleading imo.

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#4

Yeah couldn’t agree more here. I never really liked the term and it’s something that retail liquidity providers typically latch on to because of how much the narrative is pumped.

Being an LP is taking a specific position. It can earn you money or lose you money. Might as well call buying BTC at 50k then continuing to hold at 40k “impermanent loss”.

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