Have you considered the fact that everyone in a pool are losing money with each price change, regardless of the direction? And the fees they receive cannot compensate for the loss. To me this looks like the main source of "value". And what you call a "sustainable model" is more like trying to profit from rakeback at a casino
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Have you considered that this is a 100% inaccurate assessment?
If an LP pumps and then dumps back to the same ratio it is literally impossible to lose money as a liquidity provider. In fact the only possible result from that scenario is profit.
You are really going to try and claim that it's impossible to make money providing liquidity for an LP? I'd say that's not going to age well except it's just dead on arrival.
You are one of the few people here that actually knows what rakeback even is, but your analogy is wildly misleading. LP providers only have to pay the rake one time. The "rakeback" they collect in return can be exponentially more than what they put in (without being a pyramid scheme).
The OP stands. The wrapping fee is a huge gain to the network compared to how it worked before with very little downside. This is the topic of discussion.
Yes, you will make some tiny profit if the price dumps back, but that's the best scenario.
Basically the LP providers are trading against the market, thus they are taking risks. But the profit they receive is not enough to cover the risks. So yes, I'm saying you cannot consistently make money from being an LP provider.
Also the wrapping fee is being paid by those who buy cheap from the pool and sell high externally or vice versa. So it is a fraction of their profit which is your loss
Taking the bHBD-BUSD pool as an example: the price always reverts to $1.
If it goes lower than $1 temporarily, it will go back up
Higher, it will go back down.
All of that volatility simply leads to arb and trading fees collected both by the protocol and by LPs. Impossible to lose money unless you enter the LP at $1 and exit at $0.90 in the moments before it is arb’ed and rebalanced. Since bHBD is always redeemable for HBD, the price always reverts back to $1 along with HBD returning to its peg.
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You're talking cliches that you've probably heard from some LP owners. What do you think will happen if you enter at $1, exit at $0.90 and then the price goes back to $1? You will make more profit than those staying in the pool. The problem is that this price movement would require someone to sell all the way down to $0.90 and then buy back to $1.
Ask yourself how do you call such guy and you'll know why it can't be consistent.