Does a Flash Loan Exploit Directly Cause or Simply Leverage Existing Impermanent Loss?

A flash loan exploit does not directly cause impermanent loss, but it leverages the existing vulnerability created by the AMM's pricing mechanism and the resulting price divergence. Flash loans allow an attacker to borrow a large amount of capital, execute a massive swap to manipulate the pool's price, and then execute another action (like liquidating a vault or exploiting another protocol) before repaying the loan in the same transaction.

The large, rapid price change caused by the flash loan's swap maximizes the impermanent loss for the LPs during that brief moment, which is a side effect of the price manipulation, not the primary goal.