For those of you thinking of providing liquidity - some perspective

Now that CCIP-051 looks like it will pass, I appreciate all the great guides popping up about how to provide MOON/ETH liquidity on SushiSwap.

For those thinking of jumping in, you might have heard something like, "...be careful about impermanent loss ... although fees can offset that." I am going to explain what the heck that last part actually means in simple terms and with numbers from my recent experience.

Mainly, I am going to point out that you will not earn much in fees at this stage. Right now, the fees that become shared with liquidity providers for MOON/ETH on SushiSwap total about $5 per day over the last 4 weeks (this is the pairing the new community poll is focused on).

That ~$5 is getting split across 1,354 holders as of today based on how much liquidity they are providing. The top holders soak up the majority of this small amount often leaving less than a penny for even those with substantial money in the mix.

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SushiSwap MOON/ETH liquidity transaction and fee volume per day as of 2/17

To help with perspective, that really big bar shows $22 getting split across over 1,000 people. There are several days here (last 3 weeks) where we didn't see >$1 in fees collected and that amount was shared for the entire day. Meanwhile everyone was incurring losses.

The point: the share of fees you earn by providing liquidity for MOON/ETH right now is small if not tiny for those not dumping thousands of dollars in.

If you read the various posts lately about impermanent loss for liquidity providers you will hear one thing said over and over: do not match volatile tokens. MOON is volatile (in a good way lately) and ETH is not exactly going to sit still one way or another right now.

What was my experience? I lost >$7 in 36 hours and earned <$0.02.

Being a liquidity provider is still worth it to help out the community and you will see my account on the list. I wanted to make sure those interested know they will likely lose $ like I did, and so gaining some back (not clear if enough) each month in MOON will help offset losses.

TLDR; MOON/ETH liquidity providers will need CCIP-051 MOON support to help cover losses because SushiSwap fee rewards are low and at times almost nonexistent. Being a liquidity provider is still worth it to help out the community.