Can a “Just-in-Time” (JIT) Liquidity Provision Strategy Mitigate Arbitrage-Driven Impermanent Loss?

JIT liquidity provision is a strategy where a large liquidity provider deposits and immediately withdraws liquidity within the same block, specifically targeting a large incoming trade. They front-run the trade, capture the fees, and withdraw before the resulting arbitrage trade occurs, thus avoiding the impermanent loss caused by the price rebalancing.

While highly profitable for the JIT provider, this strategy does not mitigate the overall impermanent loss for long-term LPs; instead, it captures the fee income that would have otherwise gone to them.