# How Does a Weighted AMM (E.g. Balancer) Manage Impermanent Loss for Multi-Asset Pools? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## How Does a Weighted AMM (E.g. Balancer) Manage Impermanent Loss for Multi-Asset Pools?

A weighted AMM allows for pools with more than two assets and non-50/50 weightings (e.g. 80/20).

The impermanent loss is calculated based on the divergence of the price ratio and the pool's weightings. If one asset's price rises, the loss is mitigated because the pool holds less of that asset (e.g. in an 80/20 pool).

This structure reduces exposure to the volatility of a single asset, making it useful for pairing a volatile governance token with a stable asset.

- [Differentiate between a “Market Cap Weighted” and a “Volume Weighted” Index](https://learn.greeks.live/path/differentiate-between-a-market-cap-weighted-and-a-volume-weighted-index/)

- [How Does Netting Impact Capital Requirements for Banks?](https://learn.greeks.live/path/how-does-netting-impact-capital-requirements-for-banks/)

- [Does the Weighting of Assets in a Multi-Asset Pool Directly Correlate to the Share of Impermanent Loss Attributed to Each Asset?](https://learn.greeks.live/path/does-the-weighting-of-assets-in-a-multi-asset-pool-directly-correlate-to-the-share-of-impermanent-loss-attributed-to-each-asset/)

- [How Do ‘Iceberg Orders’ Attempt to Minimize Market Impact on Public Exchanges?](https://learn.greeks.live/path/how-do-iceberg-orders-attempt-to-minimize-market-impact-on-public-exchanges/)

- [What Is the Primary Advantage of a Weighted AMM Pool like Balancer over a 50/50 Pool?](https://learn.greeks.live/path/what-is-the-primary-advantage-of-a-weighted-amm-pool-like-balancer-over-a-50-50-pool/)

- [What Are the Primary Differences between Impermanent Loss in a 50/50 Pool versus a Multi-Asset Pool?](https://learn.greeks.live/path/what-are-the-primary-differences-between-impermanent-loss-in-a-50-50-pool-versus-a-multi-asset-pool/)

- [How Does Netting Impact the Calculation of Capital Requirements under Basel III?](https://learn.greeks.live/path/how-does-netting-impact-the-calculation-of-capital-requirements-under-basel-iii/)

- [What Are the Trade-Offs between Earning High Trading Fees in a Volatile Pool versus Minimizing Impermanent Loss in a Stable Pool?](https://learn.greeks.live/path/what-are-the-trade-offs-between-earning-high-trading-fees-in-a-volatile-pool-versus-minimizing-impermanent-loss-in-a-stable-pool/)

## Glossar

### [Non-50/50 Weightings](https://learn.greeks.live/area/non-50-50-weightings/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Weighting ⎊ In cryptocurrency derivatives and options trading, non-50/50 weightings represent a departure from equal allocation strategies, reflecting a deliberate asymmetry in risk or reward exposure.

## Discover More

### [How Do Concentrated Liquidity Pools Change the Dynamics of AMM Price Discovery?](https://learn.greeks.live/path/how-do-concentrated-liquidity-pools-change-the-dynamics-of-amm-price-discovery/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Concentrated Liquidity Pools Change the Dynamics of AMM Price Discovery?](https://learn.greeks.live/wp-content/uploads/2025/10/Radial-Sector-Visualization-of-MultiAsset-Collateralized-Debt-Obligation-Tranche-Decomposition.webp)

Allows LPs to allocate capital to narrow price ranges, creating deeper liquidity and better prices within that range.

### [Does Impermanent Loss Occur in a Stablecoin-to-Stablecoin Liquidity Pool?](https://learn.greeks.live/path/does-impermanent-loss-occur-in-a-stablecoin-to-stablecoin-liquidity-pool/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does Impermanent Loss Occur in a Stablecoin-to-Stablecoin Liquidity Pool?](https://learn.greeks.live/wp-content/uploads/2025/10/Dissected-Mechanism-of-Decentralized-Finance-Yield-Farming-Utilizing-On-Chain-Asset-Tokenization.webp)

Yes, because stablecoins can temporarily depeg, causing a small price divergence that triggers the IL mechanism.

### [How Can a Pool with One Stablecoin and One Volatile Asset Mitigate Impermanent Loss?](https://learn.greeks.live/path/how-can-a-pool-with-one-stablecoin-and-one-volatile-asset-mitigate-impermanent-loss/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Can a Pool with One Stablecoin and One Volatile Asset Mitigate Impermanent Loss?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Visualization-of-Crypto-Derivatives-Spreads-Through-Overlaid-Momentum-Curves.webp)

It cannot eliminate IL, but the stablecoin acts as a fixed anchor, and specialized AMM curves concentrate liquidity near the peg to minimize price divergence.

### [How Do Protocols That Offer Single-Sided Liquidity Provisioning Manage the Risk of Impermanent Loss for Their Users?](https://learn.greeks.live/path/how-do-protocols-that-offer-single-sided-liquidity-provisioning-manage-the-risk-of-impermanent-loss-for-their-users/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Protocols That Offer Single-Sided Liquidity Provisioning Manage the Risk of Impermanent Loss for Their Users?](https://learn.greeks.live/wp-content/uploads/2025/10/Bifurcated-Tokenized-Asset-Mechanism-Revealing-Underlying-Collateralized-Derivatives-Structure.webp)

Protocols manage single-sided liquidity risk by using their native token to absorb impermanent loss, which can be inflationary.

### [Can a Derivatives AMM Design Eliminate Impermanent Loss Entirely?](https://learn.greeks.live/path/can-a-derivatives-amm-design-eliminate-impermanent-loss-entirely/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can a Derivatives AMM Design Eliminate Impermanent Loss Entirely?](https://learn.greeks.live/wp-content/uploads/2025/10/Interconnected-Metallic-Truss-Structure-Symbolizing-Decentralized-Finance-Protocol-Architecture-and-Collateralization-Mechanisms.webp)

No, but it can be minimized by using vAMMs and dynamic funding rates to keep the contract price tightly pegged to the index price.

### [In What Scenarios Is Impermanent Loss Converted into Permanent Loss for a Liquidity Provider?](https://learn.greeks.live/path/in-what-scenarios-is-impermanent-loss-converted-into-permanent-loss-for-a-liquidity-provider/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![In What Scenarios Is Impermanent Loss Converted into Permanent Loss for a Liquidity Provider?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Staking-Mechanism-Apex-Representing-Impermanent-Loss-Mitigation-in-Decentralized-Finance-Layer-Two-Solutions.webp)

Impermanent loss becomes permanent when the LP withdraws assets or if one of the pooled tokens suffers a catastrophic price collapse.

### [What Is a "Sandwich Attack" and How Does It Relate to Arbitrage in AMM Pools?](https://learn.greeks.live/path/what-is-a-sandwich-attack-and-how-does-it-relate-to-arbitrage-in-amm-pools/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a "Sandwich Attack" and How Does It Relate to Arbitrage in AMM Pools?](https://learn.greeks.live/wp-content/uploads/2025/10/Advanced-Multi-Lens-Digital-Sensor-Array-Observing-Decentralized-Finance-Volatility-Surface-Dynamics.webp)

A sandwich attack is a front-running strategy where a trader exploits a pending transaction to create artificial price slippage for profit.

### [Differentiate between a "Market Cap Weighted" and a "Volume Weighted" Index](https://learn.greeks.live/path/differentiate-between-a-market-cap-weighted-and-a-volume-weighted-index/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Differentiate between a "Market Cap Weighted" and a "Volume Weighted" Index](https://learn.greeks.live/wp-content/uploads/2025/10/Micro-Electromechanical-Systems-Encoding-Quantum-Settlement-Finality-in-Decentralized-Finance-Oracles.webp)

Market Cap Weighted uses total market value for weight; Volume Weighted uses verifiable trading volume for weight, prioritizing liquidity.

### [How Does the Bonding Curve of an AMM Affect Impermanent Loss?](https://learn.greeks.live/path/how-does-the-bonding-curve-of-an-amm-affect-impermanent-loss/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Bonding Curve of an AMM Affect Impermanent Loss?](https://learn.greeks.live/wp-content/uploads/2025/10/Close-Up-of-Digital-Asset-Interface-Reflecting-Limit-Order-Book-Dynamics-and-Option-Greeks-Visualizations.webp)

The curve's shape (e.g. constant product vs. stable-swap) dictates the magnitude of the asset ratio change.

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**Original URL:** https://learn.greeks.live/learn/how-does-a-weighted-amm-e-g-balancer-manage-impermanent-loss-for-multi-asset-pools/
