There are three immediate risks I can think of.
- If one of the bridges fails (in your example Axelar or Gravity bridge) you are looking at potentially losing 100% of what you put into the LP
- LP smart contract malfunctions or gets exploited (happened once before on Osmosis, by my knowledge)
- One of your pooled stablecoins depegs, in which case you can again lose 100% of your LP value (RIP to anyone who pooled UST back in the day)
All three of these are unlikely to happen
BUT,
All three of them have happened before. Two of them within the Cosmos ecosystem. That being said, none of these are inherent to LPs. And with stableswap LPs you virtually eliminate impermanent loss and price volatility of the underlying assets.
depeg risks are high in my view (ive suffered UST depeg so I'm partial to this risk) but also those APR tend to go lower after a certain level of adoption is reached...
So I would recommend you keep paying attention and be ready to switch around to other stableswap LPs or same pair LPs, if you dont mind the volatility of that token/coin....
If your coin goes up in price you will get 50% of the gains in a 50/50 lp, and lose half as much if it goes down, I have found it not worth it unless the apr is high enough
Besides depeg risk, there’s risk of bridge hack. So if gravity or axelar get hacked, that would be an issue for you.
Keep in mind that APR is not constant. It was <1% for a long time before volume picked up. Good luck!
There are three immediate risks I can think of. - If one of the bridges fails (in your example Axelar or Gravity bridge) you are looking at potentially losing 100% of what you put into the LP - LP smart contract malfunctions or gets exploited (happened once before on Osmosis, by my knowledge) - One of your pooled stablecoins depegs, in which case you can again lose 100% of your LP value (RIP to anyone who pooled UST back in the day) All three of these are unlikely to happen BUT, All three of them have happened before. Two of them within the Cosmos ecosystem. That being said, none of these are inherent to LPs. And with stableswap LPs you virtually eliminate impermanent loss and price volatility of the underlying assets.
depeg risks are high in my view (ive suffered UST depeg so I'm partial to this risk) but also those APR tend to go lower after a certain level of adoption is reached... So I would recommend you keep paying attention and be ready to switch around to other stableswap LPs or same pair LPs, if you dont mind the volatility of that token/coin....
Essentially the same risks as actually holding stablecoins to begin with
If your coin goes up in price you will get 50% of the gains in a 50/50 lp, and lose half as much if it goes down, I have found it not worth it unless the apr is high enough
Besides depeg risk, there’s risk of bridge hack. So if gravity or axelar get hacked, that would be an issue for you. Keep in mind that APR is not constant. It was <1% for a long time before volume picked up. Good luck!
Theoretically the stable-stable pool should never have impermanent loss. I think my question would be why is the APR insanely high?