Yield Farming Risks - Impermament Loss & APYs

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All trading involves risk. Only risk capital you’re prepared to lose.Past performance is not an indication of future results. This content is for educational / entertainment purposes only and is not investment advice.

RESOURCES MENTIONED:

Track Impermanent Loss:

https://apy.vision/

Manual IL calculator I showed:

https://dailydefi.org/tools/impermanent-loss-calculator/

Binance's Page on Impermanent Loss:

https://academy.binance.com/en/articles/impermanent-loss-explained

That tool which shows a lot of the farms on different chains:

https://vfat.tools/

About The Video:

This is the first of 3 videos looking at some of the risks of Yield farming which I've come across so far (there may be others I haven't seen yet...)

In this first vid, I'll be looking at Impermanent Loss, which is a risk associated with providing liquidity on decentralised exchanges. Whenever we yield farm (at least for now...) we need to provide liquidity and then bring our LP token to the farms and stake it to earn rewards.

"IL" as it's known is an ever present risk with liquidity provision because of the the way the decentralised exchanges we're using are built. The exchanges are known as Automated Market Makers, or "AMMs" for short. They have many great features, but also the way they're built means this risk of impermanent loss is ever present.

When we provide liquidity, we always provide it in a pair - there are always two different tokens which we're providing liquidity with - much like a classical Forex pair.

Now, whilst we're providing liquidity, if the price of our tokens which we provided liquidity in changes by too much, relative to each other, then we risk losing money due to impermanent loss.

the solution is to always watch the prices of the tokens we've provided liquidity in. We can do this manually, or use online tools which people have been made to track these risks by reading our wallets and showing us constant stats on whether we're incurring "IL" or not. They're very clever...

I also go over APYs in this video - the "Annual Percentage Yield" numbers which we always see in crypto DEFI farms which entice so many of us in, promising massive returns. Can we rely on these numbers? Or will they change so radically and so dramatically that they almost become misleading? I'll explore these questions a little based on my own experience so far.

Watch the playlist below to follow all the steps which brought me to making this video - the basics of DEFI...

DEFI (Decentralised Finance) Beginners Playlist:

https://www.youtube.com/watch?v=QBG2gtw4Flw&list=PLSp_9hRpu6lIsDWgMY9Eqdr8qcIbV8JP0&ab_channel=SocialTradingVlog

Etoro Beginners Playlist: https://www.youtube.com/watch?v=-qeBPdi5LR8&list=PLSp_9hRpu6lKOj-KjMnlULlG62zXNIBz9

Affiliate Disclosure: Many of the links in this description are affiliate links and eToro may pay me commission if you follow them.

Видео Yield Farming Risks - Impermament Loss & APYs канала Social Trading Vlog