$KUROBUTA
Fading QuicklySnapshot Window: 2026-07-06 02:00 UTC · ← Back to Crypto Overview
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glad i stumbled across this post, tried the same idea for explaining impermanent loss on @MeteoraAG and one-shotted this with @HyperFrames_ I didn't even suggest the topic, claude went on my computer and built the concept on what it could find in other repos. Fable 5 really is [Spoken audio]: impermanent loss. It's the number one reason liquidity providers lose money without ever getting rugged. Here's what's actually happening. Say you deposit into a SOL token pool. Five SOL on one side, 500 tokens on the other, $1,000 split 50-50. Your liquidity sits in a range of price bins. SOL below the current price, ready to buy. The token above it ready to sell. now the token starts falling. As the price drops through your bins, the pool automatically swaps your SOL into the falling token. You're buying the dip all the way down, and if it falls out of range, you're left holding 100% token. So let's compare three wallets. Wallet one just held the 50-50. $900. Wallet two, your LP position. About $840. Wallet three went all in on the token at the start. 800. That's $60 gap between your position and just holding your deposit that is impermanent loss. But notice you still beat the all-in wallet by $40. The pool bought your tokens below your entry like an automatic DCA. Impermanent loss is only ever measured against holding the 50-50. And why impermanent? Because if the price climbs back the gap closes on its own. It's only locked in when you withdraw. And remember, every swap through your bins paid you fees. If the fees beat the gap, you still come out ahead.
