When Impermanent Loss Gets Lost…
Market Meditations | June 21, 2022
Bancor launched in 2017 as one of the first decentralised exchanges (DEX) on the Ethereum network. The platform became extremely popular as users could receive protection against impermanent loss.
Tip: Impermanent loss is a temporary loss of funds when providing liquidity to two unrelated crypto assets to a liquidity pool.
Following the recent crypto crash and heavy selling pressure of the native Bancor (BNT) token, the DEX has paused its impermanent loss protection feature.
- The BNT token acts as an intermediary token connecting liquidity pools in the network and across blockchains.
- According to Dune Analytics, there was a massive spike in the number of BNT tokens minted in June to provide impermanent loss protection.
- Large centralised entities have recently sold large amounts of BNT tokens paid to them as impermanent loss protection, creating selling pressure.
- To protect BNT from further depreciation, the team have temporarily halted any impermanent loss protection until the market stabilises.
In a blog post shared on Monday 20th June, Bancor stated that “the temporary measure to pause IL protection should give the protocol somen room to breath and help BNT recover”. The team also confirmed that there are currently no ongoing attacks and that funds on the protocol are secure.
