I sort of understand the basics of LP and impermanent (divergent) loss. What I’m confused by, and maybe I need an ELI5 explanation, is when it comes to a Liquidity Pair where one is a regular coin like ETH and one is stable like USDC.
If I stake equal parts ETH and USDC, wouldn’t the ETH always diverge from the stablecoin since ETH will fluctuate but USDC should always = $1.00 (in theory).
My basic understanding is for LP farms, you want as little fluctuation as possible, and if there is fluctuation, there is less imperm. loss if the prices fluctuate *together*, both go up, both go down. Is this correct?
I’m assuming USDC > DAI (for example) would be the lowest risk, lowest yield LP farms since the price should in theory always remain the same. But just confused how non-stable > stable LP farms work.