Liquidity Cost Averaging Out of Moons - [SERIOUS]

tl;dr: If the price of Moons is expected to rise higher than ETH, and a Liquidity Provider’s strategy is to cost average out of Moons above a specific price, then providing liquidity can be a doubly rewarding exit strategy.

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CCIP-066 has now been implemented. This means that each month, 5% of the u/TheMoonDistributor wallet, which currently holds over 1M Moons, will be sent to the Sushi ETH/Moon liquidity pool for rewards distribution to liquidity providers. This month, the moon rewards are 2K per day, divided among liquidity participants regardless of the swap fees. There are also Sushi token rewards, but only 59 per day.

Rewards are paid to LPers because their Moons shore up price stability, reducing slippage for buyers and sellers. It's a service to the community.

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In a post I was reading, there were a lot of questions, confusion, and fear of “IMPERMANENT LOSS.”

Instead of panic buying and selling at emotional price point triggers, consider becoming an LP with the primary benefits being:

• Profiting every time someone swaps - this is reflected in the APR fees %
• Sushi token rewards for staking liquidity position - this is a small part of the APY rewards %
• Moon token rewards for staking liquidity position - this is the majority of the APY rewards %

The exit strategy benefits for LPers aren’t entirely apparent in the fees and rewards.

First, the entry price where one starts providing liquidity is significant because, from this price point, an LP will either buy or sell Moons as the price fluctuates.

Say an LP starts providing liquidity at $.30. If the price of Moons falls below $.30, the LP’s Moon balance will increase, and if Moons go above $.30, the LP’s ETH balance will increase. So, if the LP withdraws liquidity while the price of Moon is below $.30, the LP will receive more Moons than was deposited, and vice versa, more ETH if Moons are above $.30. This is the basics of impermanent loss - impermanent loss is only permanent if you withdraw above or below your entry price.

The permanent loss above the price where liquidity was initially provided can represent a disciplined and automatic approach to cost average selling - liquidity cost averaging (LCA) out of the token that roses in price compared to the paired token.

The benefits are severalfold:

• Selling above a predetermined price point
• Emotionless buying and selling automation
• No fees for buying or selling

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Here is my exact approach:

I started providing liquidity when Moons were at $.50 and ETH was $1,800. I put in 20K Moon and just over 5 ETH. I was rewarded 2,400 Moons for the first month of providing liquidity. Note that the rewards were higher last month; I'll make about 1,200 moons in rewards this month.

Let's say in December, Moons hit $1 and ETH is $2k and I pull my liquidity.

Holdings at $1 Moon and $2K ETH:

What is the difference:

150 days in the pool results:

I can LCA out of 5,578 Moons without thinking about it. And walk away with an additional 2.21 ETH from the impermanent loss and around 6,000 Moons from rewards.

Notice that there seems to be an inaccuracy in the APY earned. That is because the interest is mainly in Moon rewards that are appreciating in value over the 150 days.

If rewarded Moons are held results:

The Moon rewards' appreciation represents a 30% additional gain over the 150 days.

Ultimately, providing liquidity is extremely rewarding and solves some of our hesitations with selling.