I’m fairly new in this aspect of the crypto world and I’m still trying to figure out something about pooling and impermanent lost.
Think I got the main point, if on a LP pair one pump or drop it create IL.
If you pool stable/stable like, usdt/usdc, then IL should not be possible as no divergence should occur right ?
My though about the wBtc/Digg was kinda the same as Digg peg on the bitcoin should play the same role as a stable/stable pooling right ?
Here’s come the kicker, as the Digg rlz and trading way above his peg price a spot for arbitrage is created ?
I have a practical example. On the evening of the 25th January, I pool 0.48 Btc into the wBtc/Digg pool with this ratio :
Wbtc : 0.224
Digg : 0.112
At the time it was matching my 0.48xxxx btc
On the night between the 25th and 26th a significant drop occur on the pool as display on the badger vision.
As of today on the 29th my total value converted in Btc is now of 0.35xxx.
My share of wBtc has drop and my share of Digg has increases by a small amount.
In this example, I feel like I’ve pool at the worst possible time, got my position arbitraged creating a significant IL and that now that the Digg is within the threshold it should “solve” the issue of IL as a usdc/usdt pooling ?
Not whining here, that’s the game and knew mostly where I stepped, just want to defog my grey area on the subject and see if maybe there is a scenario where my position could recover.
Not fully aware of the whole, my original though was that even if the Digg was trading way above the bitcoin price the rebase should have counter the arbitrage spot by positively increase my Digg amount.
So between the 25th and 28th when the Digg was still way above the btc price but certainly dropping his price to match btc, the next rebases would not be as much as when the Digg price is steady high. In this case the dropping price, still above btc, would initiate a small positive rebase. Thus creating even more IL on this position.
Is there a case where the price drop so massively that the next rebase even should it be positive end up negatively ?
In the end it’s clear that my knowledge of the rebase process is missing some pieces.
Thanks for any light cast on my blind spot x)