🛡️ Mitigation Strategies: Reducing IL Risk

Discover stablecoin pairs, single-sided liquidity, and IL protection

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🛡️ Strategies to Mitigate IL

While you cannot eliminate impermanent loss entirely, you can minimize your exposure through smart pool selection and strategic positioning.

Explore different approaches to managing IL risk:

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Provide liquidity to pairs like USDC/DAI where both tokens maintain similar values

Effectiveness

Very High

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Set price ranges for your liquidity. Earn higher fees but face amplified IL if price moves out of range.

Best for: Active managers who can rebalance ranges frequently

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Some protocols (Bancor, THORChain) offer single-sided staking where the protocol absorbs IL risk.

Trade-off: Often requires holding protocol tokens or has different risk models

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Some platforms offer IL protection that increases over time (e.g., Bancor v2.1 had 100% protection after 100 days).

Caveat: Often requires long lockup periods and protocol tokens

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Advanced users can hedge IL exposure using options or perpetual futures on the assets.

Complexity: Requires understanding derivatives and active management

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Before providing liquidity, ask yourself:

Pool Category	IL Risk	Fee Potential	Best For
Stablecoin Pairs	Very Low	Medium	Risk-averse LPs
Correlated Assets	Low	High	Balanced approach
Blue Chip Pairs	Medium	Very High	Experienced LPs
Altcoin Pairs	Very High	Variable	Risk takers only