While BTC had been testing and has finally blown right through 14k, most of DeFi has been taking a beating. Balancer, or BAL, hasn't been a token able to avoid the onslaught.
BAL looked promising after making a decline to $15.34 from up as high as $35.62. That was about three weeks back, and I picked up my first few tokens at that price. But BAL wasn't done with its value slide yet.
On October 16th I picked up more BAL at $13.50 and it didn't stop sliding from there. At its lowest point to date, BAL has dipped to $8.71. It's currently trading right around $9.00.
Good Thing I Entered A Balancer LP
The difference between providing liquidity versus simply Hodling BAL cannot be overstated. Sure, a gutsy short would have brought in more BAL. But those gambles have cost me in the past.
By providing liquidity, I'm almost guaranteed a return of more BAL regardless of its current value. I have had to sacrifice some ETH because of the LP mechanics. While the value of BAL fell, ETH more or less held its price.
With a pool weight of 60% BAL and 40% wETH, my holdings of BAL increased as its price fell. On top of the lower price but more BAL (and less ETH), I've received three Yield Farming payouts. These are incentives and swap fees incurred to the pool which are paid out weekly to LP providers.
Pool Performance So Far
Though I've been happy with my results in the pool so far, other big positions have pulled out. When I first entered my position, the pool had roughly 5.4 million in liquidity.
With all the exits, it's retreated to just under 1 million. That being said, there are still 37 providers in the pool.
With the removal of so much liquidity, swap volume has also retreated quite a bit. That means that fees have fallen alongside the drop in wETH swaps. My personal take doesn't seem much affected by all this. Why? Because I have a larger stake in the pool after the removal of 4 Mil in liquidity.
Personal Liquidity Performance
Now on to the proceeds of my own position in the pool. Obviously with the big drop in price of BAL, my LP has also lost value. In all, I've suffered a $33.50 loss since entering the pool.
The original value of my position has dropped from about $170 to $141.07. Notice that Liquidity Vision shows me how much BAL and ETH I put in the pool vs how much it's changed to current day. I have .04 less ETH but almost 2 more BAL.
The above view from Liquidity Vision clearly shows the difference in assets from start to now. Notice also the red circle around my LP percentage. That's up from 0.008% when I entered. It's the result of the removal of all 4 Mil in liquidity. Adding more to my position would also increase my LP percentage.
Yield Farming
Last but not least, let's take a look at my Yield Farming. My first payout wasn't for a full week of liquidity. It was paid straight to my MetaMask wallet, seen below on the Balancer Protocol.
The left shows my low available ETH and the right my BAL. Not much of a first payout at 0.067 BAL. But it was only for three days and I added a bit more to my position.
The second week paid out into a root merkle contract. The fees were getting too high to pay each provider individually. It was much nicer than my first week.
I had trouble finding this week's payout, as it hasn't shown up on Zapper.fi. When I looked directly in the merkle root contract, however, it was there.
En Finale
Perhaps investing in another token on a different AMM would have returned a higher yield. With the bloodbath in DeFi since it's surge, that doesn't seem likely. I could have lost the same value on my Hodlings without having provided liquidity, and I'd be worse off for it.
Providing liquidity didn't save me from the inevitable devaluation of my Hodlings. What it did was enable me to stack more as the value fell. How long until the value of BAL comes back up? Perhaps not long if BTC is any indicator.
Thanks for reading and as always...
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