Cryptocurrency Q&A
Can you lose money providing liquidity?
Can you lose money providing liquidity?
Maria
Sun Dec 01 2024
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5 answers
750
I'm wondering if there's a risk of losing money when providing liquidity to a platform. Could someone explain the potential financial consequences of this action?
5 answers
Federico
Tue Dec 03 2024
This concept pertains to a specific type of value reduction that arises in the context of decentralized exchanges (DEXs) or yield-farming protocols.
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MysterylitRapture
Tue Dec 03 2024
When a user decides to contribute liquidity to these platforms, they may experience a temporary decrease in the value of their assets.
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Martina
Tue Dec 03 2024
This decrease is characterized as 'impermanent' due to its conditional nature.
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BitcoinWarrior
Mon Dec 02 2024
The term 'impermanent' implies that the loss is not permanent and is contingent upon the user's actions.
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Martina
Mon Dec 02 2024
Specifically, the loss is only realized if the user chooses to withdraw their assets from the liquidity pool.
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