Cash is king. Even in crypto, we find ourselves measuring our gains and losses in dollars and cents. While some argue that we should focus on increasing our ‘token count’ long term, we still eventually come back to that sweet U.S. Dollar, or Euro, for how we measure our success.
In the world of yield farming, the boogieman known as Impermanent Loss keeps every farmer on their toes. Despite the superior earning potential of most staking pools and spot positions, yield farms come with their own unique pitfalls that one has to navigate.
Impermanent Loss Explained
A traditional liquidity pool (LP) requires two tokens to be paired together, each making up 50% of the pool. This 50/50 split will be maintained at all times. However, depending on which tokens are in the LP, their prices can change, which changes the number of tokens required on each side to maintain that equal split.
This change can be positive, or it can be negative. Think of it as an unrealized opportunity cost. It’s not a real loss, because the loss is measured against the value your investment would have been if the tokens were held outside of the liquidity pool.
While some protocols find ways of combatting this with weighted LPs, where it can contain up to 80–90% of one of the two tokens, we continue to find ways to empower and hand control back to the user.
Swing Trading Farms
Stasis Network contains an innovative new feature that will provide yield farms a unique opportunity to yield farm and swing trade simultaneously. You read that right, earn yield and trade at the same time.
The protocol has two yield farms; the native token STS can be paired with MATIC or our stable-backed asset STS+. MATIC is a volatile asset that moves with the market, whereas STS+ is a programmed, ever-appreciating asset that protects against market volatility.
An apt analyzer of market conditions can weaponize Stasis Network’s Farm Migration feature to capitalize on macro market movements to positively affect the fiat value of their yield farms within the ecosystem.
Farm Trade Example
Let’s say you are in the STS/MATIC farm, the market has been green, your fiat value of the farm has climbed, and it now sits at $10,000. 50% is STS, 50% is MATIC.
But then the macro market drops 20%! MATIC goes down 20%, STS weathers the drop a bit better and is only down 15%. Your farm will have then lost 17.5% of its value, with the fiat value down to $8,250.
With our new farm migration system, and some simple technical analysis, you could have partially protected against this contraction.
Same example: you see the market is about to turn, and you migrate your farm to the STS/STS+ LP for a 2% fee. Your farm is now worth $9,800. 50% is STS, 50% is STS+. The macro market drops 20%. STS drops 15% like before, but STS+ rises 1% due to its mechanics. Your farm will now have only lost 7% of its value, with a fiat value of $9,114.
Outcome: $8,250 vs $9,114. By swing trading the farms, you would have saved yourself 8.64% of your farm’s fiat value.
At this point, you could swing back to the STS/MATIC farm. A 2% fee would then make your farm worth $8,932. If the macro market returns to its previous levels, your farm would rise in value ~21.2%. This would make your farm now worth $11,045.
By swing trading your farms, you turned $10,000 into $11,045 while simultaneously earning yield within both farms the whole time. Another strategy within the unique mechanics of Stasis Network that you can leverage to your advantage and cancel out the classic problems that persist with traditional DeFi.
The Public Presale for Stasis Network begins today, June 9, at 20:00 UTC. Don’t miss out on an opportunity to be a part of a protocol that will help lead the space into the next market cycle.
To find out more about Stasis Network:
Yahoo Finance Release: https://tinyurl.com/4dj8f6ym
Social Media for Stasis Network:
Stasis Network is a subsidiary of BlockCentral Inc, a Panama-based company focused on the advancement of blockchain adoption and education.