Please note that this letter is not intended as financial advice.
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In DeFi, the decision to provide liquidity in an Uniswap pool it was always something difficult to me.
To help my decision making in the specific case of providing liquidity to FEI-TRIBE pair, I created the model below, that considers: impermanent loss, generated fees and the staking rewards.
I made some analysis considering an investment of USD 5,000 and different prices for TRIBE at the end of the period:
Source: FEI-TRIBE LP Staking Calculator v3 - Google Sheets (you can play with the model here)
Staking and Compounding weekly means that you will use your TIRBE staking rewards to buy FEI and provide more liquidity to the pair. So, you are reinvesting weekly your rewards.
Some conclusions from these scenarios:
Simple holding 50% FEI | 50% TRIBE without providing liquidity is the worst option in all scenarios.
In case of a quick increase in TRIBE price (>100%) in 3 months, holding 100% TRIBE is better
Staking & Compounding performs better in all time frames when considering TRIBE price stability or decrease
When considering timeframes of more than 6 months Staking & Compounding and Only Staking performs better
Considering the 1 year investment scenario, Only Staking is superior when TRIBE Price appreciate 4x (US$ 3) in relation to the current price (US$ 0.75). When TRIBE Price is below that, Staking & Compounding is the best option.
When considering a linear increase in TRIBE price during the period (the above table consider just an increase in the end of the period), Staking & Compounding is the best option in all scenarios of 6months and 1 year.
The results can vary with the amount of LP Tokens staked by the market and the effective APR during the period.
An interesting tool to stake the LP Token and reinvest the TRIBE staking rewards was created by a Fei community member, @eswak: https://fei-tools.com/