Impermanent loss is one of the risks of liquidity mining and what scares many people from providing liquidity into highly volatile pools.
In this post, I will be sharing with you the top 3 ways I try to avoid IL that you too can apply.
The first is by investing in single token pools where you provide liquidity with or stake a single token to earn more of that token or a different one.
The second is to invest in a liquidity pool that allows you to farm another token using the liquidity provider (LP) token you received when you add liquidity to a pool. So, you're not only earning fees from the pool, but you also earn a different token by staking your liquidity provider token in another farm or platform. Hopefully, the value of the fees you earn plus the new token will offset any impermanent loss you incur.
The third and the least appealing in terms of potential returns is by providing liquidity with stablecoins. Since their value does not change, whatever you earn as fees from the pool is profit.
How do you attempt to avoid the infamous impairment loss?