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February 03, 2021, 09:11:53 PM |
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Let me tell you with an example Let's say at the time of adding liquidity 1 Ethereum = 1600USDT
You add 2 Ethereum and 3200USDT to the pool The pool rule is: x * y = k (constant) 2 Ethereum * 3200 USDT = 6400 Your asset value = 2 Ethereum * 1600USDT +3200 USDT = 6400USDT
For example, if the Ethereum price is 2000 USDT Your assets on the pool will be contained in the following proportion: 1.6 Ethereum * 4000USDT = 6400 Your asset value = 1.6 Ethereum * 2000USDT + 4000 USDT = 7200 USDT
You can leave the pool, buy 0.4 Ethereum for 800USDT and revert back to the initial ratio: 2 Ethereum to 3200USDT. You need to understand that you need to pay for several commissions: confirmation of funds, adding liquidity, withdrawing liquidity and exchanging Ethereum for USDT. Perhaps these costs will not cover the profit from adding liquidity to the pool.
For example, if the Ethereum price is 1200 USDT Your assets on the pool will be contained in the following proportion: 2.67 Ethereum * 2400 USDT = 6400 Your asset value = 2.67 Ethereum * 1200USDT +2400 USDT = 5600 USDT You can leave the pool, sell 0.67 Ethereum for 800USDT and return to the initial ratio: 2 Ethereum and 3200USDT.
Risks: You may lose funds if the smart contract is hacked. If USDT becomes a scam, then the ratio of your funds on the pool: for example 0.000064Ethereum * 100000000 USDT = 6400 That is, you will lose all your money.
The same will happen if there is any shitcoin in place of USDT that will quickly lose price.
The best pool: stablecoin * stablecoin , for example USDC * DAI
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