A lot of people think that market making is just putting money in to collect trading fees, lying back and earning, and that impermanent loss sounds like something someone mentioned but they didn’t really pay much attention to. Over the past couple of days, I looked at a few AMM curves. To be honest, with the same two coins, the slippage and liquidity depth can differ a lot across different pools…

With Uniswap V2’s constant-product model, when prices swing a lot, your position changes pretty aggressively—especially during extreme moves at both ends of the market—so it gets skewed quickly. Put simply, impermanent loss isn’t some kind of mysticism; it’s mathematics. Plot the equations and you’ll understand.

Recently I’ve also been seeing a few new L1/L2s rolling out incentives to pull TVL. The old hands dig in while shouting about withdrawals, and when the coin price drops, the fees can’t cover the principal shrinking, and then they complain. Honestly, that’s normal. Incentives aren’t giving you money—they’re asking you to absorb the volatility.

Anyway, when I do market making, I’ll use narrow ranges, or I’ll only provide stablecoin pairs—it’s easier. It’s not that I’m afraid of losses; I just don’t want to bother calculating. Ah, the thing about curves— the more you understand, the less you dare to throw money in randomly.