Polars: Remove liquidity (Impermanent losses explanation)
Today you can remove liquidity from the Trade Pool by returning PTPT back. Chances are, you will get a little less tPOL back than you add. For example 437 tPOL. This is normal, you have received impermanent loss. The liquidity provision period was too short, the total token price did not change enough to cover the impermanent loss due to changes in the prices of WHITE and BLACK tokens.
Don’t worry, you will receive the full amount of your tokens as an airdrop (450 tPOL). We will compensate for the impermanent loss. In the future, we will release a detailed article on how to add and remove liquidity and make a profit, as well as give recommendations on the timing of liquidity provision, since 10 days was clearly not enough.
You must remove liquidity within 2 days, until September 23 inclusive. Already on September 24, we will start the airdrop accrual process and it will be irreversible.
In order to calculate the approximate impermanent loss, you can use the official calculator of the Balancer pool: https://baller.mechanaut.xyz/
You Can learn more about impermanent losses here: https://medium.com/balancer-protocol/calculating-value-impermanent-loss-and-slippage-for-balancer-pools-4371a21f1a86
When you buy and sell WHITE and BLACK tokens, you pay a 0.3% swap fee twice. The liquidity gains should also offset these losses, but this will take a little longer.
Impermanent losses explanation
During the test competition on the tPOL platform, users generated a trading volume of 10,784,714 tPOL in the Trade Pool. Liquidity providers generated 22,647 tPOL commissions. The total volume of liquidity provided in the Trade Pool was approximately 1,700,000 tPOL. The 10-day yield was 1.33%, or 48% APY.
As you can see, the liquidity providers made a profit of 1.33%. Additionally, the aggregate price of WHITE and BLACK tokens increased and this allowed to earn approximately 6.6% more. The total income was 7.93%. At the same time, liquidity providers at the moment received an 11% impermanent loss, and also lost about 0.5% on swaps commissions. The total expenditure side amounted to 11.5%. As a result, we subtract expenses from income, and we get at the moment a loss of about -3.57%. If you added about 450 tPOL to liquidity, you will remove at current prices of about 433 tPOL.
In the following articles, we will tell you how to properly add liquidity to make a profit, how to avoid impermanent losses and for what period it is better to add liquidity. Thanks for your support.
The new DeFi platform for creating secure polar tokens, the price of which depends on the results of specific external events. Within the POLARS platform, users can buy, sell and exchange polar tokens, as well as participate in the distribution of the platform’s commission income.