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Question about unrealized PNL in Liquid Swap

Hello,

I’ve read extensively about Liquid Swap and I’m experimenting with it a bit but there’s something that’s still not clear to me.

I understand more or less how impermanent loss works, but the thing is that all my liduid swaps have impermanent gain right now, i.e. positive PNL. Some of them have a 10% UPNL compared to what I put in so I’m wondering if it works to redeem all of what I put in and then put them back in again to lock in the profits or if it’s just better to keep them there long term.

Imagine you are LONG on ETH at 1500. Now the price is 1800. It makes no sense to close the position and then buy back in again because you had the advantage of having entered at a lower price. I want to understand if this reasoning applies to liquidity pools as well (i.e., I put the money in with a more favorable ratio so if I lock in my profits now and put the money back in I expose my self to a higher probability of a negative UPNL by doing so).

Does anybody know? ๐Ÿ™‚

What do you think?

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2 Comments

  1. I also saw an impermanent gain some months ago (now at a loss though), but from what I read is that if market move both sides (price up or down) compared to starting price, both will result in impermanent losses.
    Maybe the gain you see now is in absolute value less then if you Hodled the coins, therefore have relative losses, but I’m not sure either.
    Anyway, it’s a product to keep for longer time and works best if fluctuations are not so extreme.

  2. Your analysis is correct. Youโ€™re not locking in anything when you close your swap. PNL only shows gain from the time you allocated the funds. Those gains are inherent to the fact that you own the coins.

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