How Do Rebalancing Strategies for Concentrated Liquidity Positions, Such as Active Management, Impact Realized Gains or Losses?

Active management of concentrated liquidity involves adjusting the price range in response to market movements. This rebalancing impacts gains and losses by crystallizing the current state of impermanent loss at the moment of adjustment.

Each rebalance is effectively a withdrawal and redeposit, turning unrealized IL into a realized loss or gain. While this can keep the position active and earning fees, it also incurs transaction costs and requires accurate market timing to be profitable, potentially compounding losses if done incorrectly.