‼️Concentrated Liquidity Risks
Opening positions in Concentrated Liquidity Pools are associated with certain risks and should be understood before depositing!
Impermanent Loss / Divergence loss
The difference in value of an existing position in a liquidity pool VS the value had the position been held
The difference in the number of tokens of an existing position in a liquidity pool VS the number of tokens had the position been held
Price exposure to the underlying tokens
Within a position, when either of the tokens go down in value, the value of the position also goes down, and when either goes up in value, the value of the position should go up
The price exposure experienced skews towards token B when price moves to the upper limit, and towards token A when moving to the lower limit
Rebalancing risk
During a rebalance (e.g. when price moves out of range), a swap via Orca is automatically performed which realizes the experienced price increase / decrease (2), and the impermanent loss (1)
This swap can experience slippage as well, which can be larger for lower liquidity pools, and larger swaps
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