Methodology

This analytics is done to analyze the Impermeant Loss subjected to Liquidity Providers of OSMO/ATOM pools. This is how the analysis will be conducted:

1. We are going to calculate the valuation in USD of address that has removed their Liquidity Pools Position.
2. We are going to sum the initial asset contributed to the pool
3. Calculate said initial asset with the price on the exit pool date
4. Nett both type of valuation

Part 1

Table below lists the address that has exited their liquidity position and their asset valuation in USD. This is the assumed profit from participating in liquidity pools

Part 2

This part lists the address and the date at which the assets ae added to the liquidity pools. This part concerns on getting the USD valuation before the asset are committed to the pool,. This is important to measure Gain and Loss after participating as Liquidity Provider.

Summing all Asset put into Liquidity pool. we get the list below. This is

Part 3

This section calculates the value of the assets if it were held instead.

The Volume of asset is taken on the day user input their asset into liquidity pools. This will give us the volume of asset that does not depreciate to impermanent loss and giving us as if the asset are held by user.

The Price of asset are calculated based on the date where LP exited the pools. This give us the price exposure on assets that does not depreciate to Impermenant Loss.

We will get the below table.

Summing all asset, we will get the total theoretical Valuation if user hold instead of putting in LP

Based on the analysis done, 82.2% of users would be much profitable to just Holding the assets (OSMO and ATOM) than providing liquidity in the OSMO-ATOM pools.

This calculation is based on USD valuation .

Majority of Liquidity Providers, lose between 90% to 99.9% of their initial investment due to exposure to Impermanent lose and price depreciation. Price depreciation is a factor to consider when providing liquidity because LPs usually stakes their LP token for several days to gain additional yield. However, they will have to lock their LP tokens for several days, making them illiquid, thus unable to response to price action if they need to.

Should users be eager to enter a liquidity position into this pool? 

From the analysis, since most users are found out to be profitable to HOLD rather than providing LP, and most users who participate as LP experience between 90% to 99.9% loss based on USD valuation, I think user should not be too eager to enter this pool. The downside and risks that comes with Liquidity pools are too high with Impermanent Loss.

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