Define ‘Divergence Loss’ as an Alternative Term for Impermanent Loss.
Divergence loss is an alternative and arguably more descriptive term for impermanent loss. It highlights that the "loss" arises specifically because the relative prices of the tokens in the pool diverge from the initial deposit ratio.
The term emphasizes the opportunity cost of providing liquidity instead of simply holding the assets in a wallet, where the price divergence would have resulted in a higher value.
Glossar
Opportunity Cost
Sacrifice ⎊ The concept of opportunity cost within cryptocurrency, options, and derivatives fundamentally represents the forgone benefit from selecting one strategy over another.
Divergence
Analysis ⎊ In quantitative analysis, divergence represents a critical discrepancy between the direction of an asset's price action and the associated technical indicator, such as the Relative Strength Index or MACD.
Divergence Loss
Discrepancy ⎊ Divergence Loss, within cryptocurrency derivatives, represents the quantifiable difference between an implied future price movement ⎊ derived from options pricing models ⎊ and the realized price movement of the underlying asset.