How to accumulate #EGLDs while lowering your risk compared to trading by Liquidity Providing [THREAD].
We will focus on the $EGLD <> $USDC pool but this strategy works with all the others but are more risky
#ElrondCommunity #ElrondNetwork
We will focus on the $EGLD <> $USDC pool but this strategy works with all the others but are more risky
#ElrondCommunity #ElrondNetwork
If you are having trouble managing your $ELGD bag by selling high and buying low. LPs are a good way to do the same thing while reducing your risk of loss.
What strategy to adopt?
Instead of farming indefinitely and suffering the impermanent loss on the downside as well as on the upside, the goal of this strategy is to mix DCA, trading and DeFi
Instead of farming indefinitely and suffering the impermanent loss on the downside as well as on the upside, the goal of this strategy is to mix DCA, trading and DeFi
$ELGD is on a +70% since its last low
With $BTC being quiet and $ETH making a great comeback, a lot of liquidity is to flow back into the alts. This could continue for some time but the first resistance is starting to be hit
it's time to prepare for potential profit taking
With $BTC being quiet and $ETH making a great comeback, a lot of liquidity is to flow back into the alts. This could continue for some time but the first resistance is starting to be hit
it's time to prepare for potential profit taking
Personally I want to take some profit on my $EGLD, but it's hard to know how long this mini Alt season could last and it would be silly to sell everything now if a +50% is still waiting for us
At each of my sell targets I will sell half in $USDC and put them in $EGLD <> $USDC farming pool, so if the price goes up again the impermanent loss will continue to DCA for sale in a linear way for me.
If the price drops as I expect, the impermanent loss will quietly DCA to the purchase of EGLD which will naturally increase my bag.
For exemple, If i want to sell $1000 worth of $EGLD at $70, I will sold only for $500 and put it with the remaining 7,14 $EGLD in $ELGD <> $USDC pool.
if the price drop to $50, I will have 8,45 $EGLD and 422 $USDC.
if the price drop to $50, I will have 8,45 $EGLD and 422 $USDC.
if I choose to recover all my eglds, I would have transformed 14,28 $EGLD in 16,9 $EGLD i.e. a capital gain of 18%
Of course if i was very good at trading and decided to do it only with trading, my capital gain would be 28%, but I reduced my risk in case $EGLD continued to pump
Of course if i was very good at trading and decided to do it only with trading, my capital gain would be 28%, but I reduced my risk in case $EGLD continued to pump
and of course you have to add to that the rewards of the pool, if the price correction from $70 to $50 took 1 month, with a pool at 120% I would have made 10% gain in $LKMEX.
You can choose to keep them, or sell them now to get some more $EGLD--
You can choose to keep them, or sell them now to get some more $EGLD--
--Which would be worth, taking into account that 1 $LKMEX is worth 0.35 $MEX, you will have farmed between ~$75/$100 of LKMEX which will be worth ~0,5/0.7 $EGLD if the price of $MEX / $EGLD remained stable during this time
14,28 $EGLD became ~17.5 $EGLD for a $EGLD gain of 23%.
14,28 $EGLD became ~17.5 $EGLD for a $EGLD gain of 23%.
what if the price of $EGLD continues to rise to $100 ?
On this first trade/LP where I sold 7.14 $EGLD for 500 $USDC, It will remaining 5.98 EGLD and 597 $USDC left in the pool, so 1195 $USDC with an impermanent loss of 2.32 $EGLD minus $LKMEX Rewards
On this first trade/LP where I sold 7.14 $EGLD for 500 $USDC, It will remaining 5.98 EGLD and 597 $USDC left in the pool, so 1195 $USDC with an impermanent loss of 2.32 $EGLD minus $LKMEX Rewards
The value of my $EGLD would have been 1428 $USDC if I had not sold them and put them in LP
if I had just sold them all without putting them in LP at $70 I would have 1000 $USDC or a loss of 4,28 $EGLD at $100
So I still reduced my losses compared to selling everything at $70
if I had just sold them all without putting them in LP at $70 I would have 1000 $USDC or a loss of 4,28 $EGLD at $100
So I still reduced my losses compared to selling everything at $70
but of course I still have $EGLD to do the same strategy at $100 to increase my selling price.
DCA, Trading and Liquidity Providing, the Tri-Force of the accumulation
In case it was not obvious to understand, a small image to summarize the strategy
DCA, Trading and Liquidity Providing, the Tri-Force of the accumulation
In case it was not obvious to understand, a small image to summarize the strategy
So you accumulate $EGLD through impermanent loss and through the buyback of those lower than they were sold.
Summary of the above strategy and your potential gains/losses based on the $EGLD price.
And this does not take into account the $LKMEX collected while farming
Summary of the above strategy and your potential gains/losses based on the $EGLD price.
And this does not take into account the $LKMEX collected while farming
I chose sales at 500 USDC to simplify the calculation but we could choose a fixed sale in EGLD each time
As soon as the $EGLD price falls below your average purchase price, you have accumulated $EGLD, otherwise you have a loss compared to Hodl
As soon as the $EGLD price falls below your average purchase price, you have accumulated $EGLD, otherwise you have a loss compared to Hodl
and this strategy is even more powerful if you already have $USDC, it will reduce the impermanent upside loss of your $EGLD by half since you didn't have to sell any of them to enter in the pool.
If you are in a perspective of profit taking and permanent accumulation, this strategy is for me the best.
But if you are a moonboy and you think that the $EGLD will only go up and not return lower than the current price during this bearmarket indeed you will lose out on this strategy.
Personnaly I prefer risk management
Personnaly I prefer risk management
Thank you for reading, do not hesitate to give me your feedback on this strategy !
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