Being a successful LP isn’t just about finding high yields—it’s about managing the risks that come with them.
Types of LP Risk
- Impermanent Loss: Price divergence between pool assets
- Smart Contract Risk: Bugs or exploits
- Token Risk: Rug pulls, depegs, project failure
- Protocol Risk: Governance attacks, fee changes
Position Sizing
- Tier 1 (Uniswap, Curve, Aave): Up to 30% per protocol
- Tier 2 (Established): Up to 20% per protocol
- Tier 3 (Growing): Up to 10% per protocol
- Tier 4 (Experimental): Max 5% total