Honestly, everyone already understands it: that AMM curve looks silky smooth—until you actually go in and make a market, then you realize it’s not “easy money” lying there waiting for you… These past two days I’ve been watching net fund flows and the cost distribution, and I’ve found that once the price moves one-sidedly, your position gets “swapped over” to the weaker side. On the books it still looks pretty stable, but when you go back and do the numbers, the impermanent loss immediately eats up a big chunk of your fees. To put it plainly, the fee rate is just a subsidy for volatility; when volatility gets irrational, the subsidy isn’t enough.

It also reminded me of the recent NFT royalty drama—it’s pretty similar. Everyone wants liquidity, and everyone wants to take home a bit more, but in the end it still comes down to the curve and incentives balancing the accounts, and it doesn’t get solved just by shouting a couple lines about “supporting creators”… Anyway, right now I’m making markets a bit slower, testing with small positions. I’d rather earn less than get yanked around and end up unable to sleep.