Part 4/8:
Liquidity Pools: A Closer Look
When adjusting liquidity pools for correlated assets, such as Ethereum to USDC versus Ethereum to wrapped Bitcoin, we can see notable differences in projected returns. An example illustrates this point vividly: If one were to invest in a liquidity pool consisting of equal parts Ethereum and wrapped Bitcoin, the annual percentage rate (APR) calculated over a specified timeframe might yield a higher return compared to pairing Ethereum with USDC.