Guide

Impermanent loss in stablecoin pools

In a stablecoin pool impermanent loss is close to zero while both coins hold their peg, because the loss comes from price divergence and pegged assets barely diverge. Low is not zero, and a depeg is the exception that matters.

The numbers, worked

Impermanent loss grows with how far the two assets drift apart. Between two stablecoins the drift is normally a fraction of a percent, and the loss curve is nearly flat near 1:1. A 1% relative drift (say one coin at $1.00 and the other momentarily at $0.99) works out to roughly 0.001% of impermanent loss; even a 5% drift stays around 0.03%. Compare that with a volatile pair, where a 2x divergence costs about 5.7%. You can test any scenario yourself in the calculator.

The exception that matters: a depeg

The flat curve has a cliff at the end. If one stablecoin loses its peg, the pool does exactly what an AMM is built to do: it lets traders swap the failing coin for the good one until the LPs are left holding mostly the failing coin. At that point the loss is not impermanent in any meaningful sense. The USDC depeg weekend of March 2023 showed the mechanism: pools drained of the strong asset within hours. That tail risk, plus smart-contract risk, is what a stable pool's yield is actually paying you for.

The honest checklist

• Use established, transparent stablecoins with published reserves.
• Prefer deep pools with real volume, so the fees are worth the tail risk.
• Remember the yield is compensation for depeg and contract risk, not free interest.
• Size the position so a depeg would hurt, not ruin.

Where Pool Party fits

Stable pairs are the calm end of liquidity provision; Pool Party automates the management of positions on Base across that spectrum, with self-custody and contracts you can verify on-chain. Launch the app.

Frequently asked questions

Do stablecoin pools have impermanent loss?

Almost none while both coins hold their peg: impermanent loss comes from price divergence, and two dollar-pegged assets barely diverge. It is low, not zero, and the real tail risk is a depeg, where the LP ends up holding mostly the failing coin.

What happens to LPs when a stablecoin depegs?

The pool automatically sells the strong coin and accumulates the failing one as traders exit through it. An LP can end up holding mostly the depegged asset at a loss that is anything but impermanent. This is the main risk stable-pool APRs are paying for.

Are stablecoin pools worth it?

They can suit people who want fee income with minimal divergence risk and accept lower yields plus depeg and smart-contract risk. Whether the fees justify those risks depends on the pool volume and the coins used. This is not financial advice.