Polygon LP Reflection

Polygon LP Reflection

With 60 days having passed since we opened the Polygon CLP, we wanted to take time to reflect on the performance of the Clipper Polygon pool.

In our post on yield, we distinguished between two ways of calculating the returns to LPs, including all gain and loss (which others would refer to as “fees” and “impermanent loss”). In short:

  • Dollar basis yield **calculates the net return to pool LPs using the dollar values of the crypto assets in each block. It is very sensitive to external market price changes.
  • Crypto basis yield calculates the net return to pool LPs using the dollar values of the crypto assets currently. Since it fixes those market prices, it removes the effects of market price changes from the “real” performance the exchange for its LPs.

Although they have recovered somewhat, the biggest stylized fact of crypto markets since we launched on Polygon is that crypto assets have fallen significantly against the dollar. For instance, MATIC, Polygon’s native token, lost nearly 50% of its value peak-to-trough, falling from almost $3 per token to just above $1.50 per token. (It now trades at around $1.90, although the price is highly volatile.)

The crypto price crash means that on a dollar basis, the Polygon pool has struggled. It has lost about 5% of its value since launch, or about 17% on an annualized basis. On a crypto basis, however, the Polygon pool has done quite well. Since its inception it is returning more than 30% annualized yield.

Given the huge price swings in crypto markets, producing a return like this is quite a feat. It’s hard to do a straight comparison between the seven-asset Clipper Polygon pool and traditional Uniswap LP, but a reasonable comparison (given the heavy representation of stablecoins in the Clipper pool) is to being an LP in a Uniswap USDC-WETH pool. Those Uniswap LPs have lost about 3% (-12% annualized) over the past three months.

Clipper is a non-custodial mechanism and we cannot stop LPs from withdrawing their assets. However, we believe that Clipper is establishing a track record on Polygon for world-class performance for its LPs, and we look forward to bringing that track record to new networks as well. Please feel free to join Clipper’s discord and ask us any questions in the #AMA channel.