Impermanent Loss or Unexpected Gain — JETTON / TON Farming
Check out my first article about farming on STON.fi.
Impermanent loss is a situation when one of the tokens (that you’ve provided to the liquidity pool) has significant price changes. I want to show an example of impermanent loss and explain how it works on the example of JETTON/TON liquidity pool on STON.fi.
Why I’ve provided liquidity to the JETTON / TON pool?
I’ve seen an announcement of Jetton farming prolongation on Dec 16th and as usual, I’ve jumped in the first hour.
It’s important to note that the highest profit I got on the first day. 2.3 $Jetton in comparison to 10 $Jetton in 15 days (7.7/14 ~ 0.55 Jetton a day). In my opinion, some of the liquidity providers don’t participate in the farming event at the start + it’s less saturated (TVL is less at the start of the farming event).
This farming event is interesting because of:
- Its time frame (1 year instead of usual 1 month)
- No lock-up period (instead of 14 days). You can withdraw liquidity at any point in time.
The rewards pool at that point was not looking that significant 9000 JETTON * 0.26 = 2340 TON ~ $5.15k a month. But my thought was to lock up 90 TON equivalent in this farm for a year and check how it would work.
Impermanent Loss or Unexpected Gain?
I saw that JETTON amount in LP started dropping (simultaneously TON amount was growing). The reason behind it is simple — JETTON price increased. During the price change arbitrage bots and users were swapping JETTON and JETTON / TON ratio increased from 0.26 to 0.83.
If I’ll hold 165.87 JETTON to this day (31st Dec 2023) I‘ll get 165.87*0.83=137.67 TON. And I will have 137.67+44.91=182.58 TON. Instead of this, I got 77.96 TON + 96.88 JETTON ~ 96.88*0.83+77.96 = 158.37 TON. Impermanent loss in this case is 182.58–158.37 = 24.21 TON.
Why do I consider this an impermanent gain? To be honest I wouldn’t buy JETTON if there was no farming event. That’s why it’s ~ 68 TON (158–90) unexpected gain for me (+10.03 $JETTON = 8.32$TON profit from the farm).
What’s next?
I didn’t understand the reasons behind the price movement (now I can say that JETTON got a license and launched their casino). I’ve fixed all of the “profit” and put it into STON / TON farm.
I could simply withdraw not all of the JETTON / TON from the liquidity pool, but due to the lack of sleep, I’ve withdrawn all of the liquidity. That’s why I’ve spent an extra fee to put the remaining JETTON + TON back.
I’ll try to not touch JETTON / TON in LP and farm. But who knows…
