It can be advantageous to lend money to a liquidity pool; however, you must consider the fact of impermanent loss. In essence, impermanent loss happens when the price of your tokens changes compared to when you deposited them in the pool.
To estimate the impermanent loss, you can use the calculator offered by CoinStats, which uses Uniswap's constant product formula. It can be found on the CoinStats website footer.
Here are the main tabs that need to be filled for the computation:
Token pair provided to the liquidity pool
Total investment amount
Initial and future price of the coin
After filling in the required information, click Let's Calculate button.
You can see if you end up in a profit or loss on the right side of the screen. Here you can find how much you will benefit or lose if you held the assets in your portfolio or if you provided them as liquidity. The percentage value will also be displayed.
To start lending crypto, click Earn Here button. Find more information about earning on CoinStast here.
Feel free to contact us at support@coinstats.app if you need more information 🧡
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