Does Impermanent Loss Occur If Both Assets in the Pool Rise in Value? ▴ Learn

Does Impermanent Loss Occur If Both Assets in the Pool Rise in Value?

Yes, impermanent loss (IL) occurs whenever the price ratio between the two deposited assets changes, regardless of the market direction. If both assets rise but one appreciates more than the other, the pool's Automated Market Maker (AMM) rebalances the quantities.

This rebalancing results in a final portfolio value that is less than the value of simply holding the original assets (HODLing). The loss is zero only if the ratio remains perfectly constant.

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