How Does High Trading Volume in a Pool Relate to the Frequency of Arbitrage and Impermanent Loss Realization?

High trading volume generally means more frequent price changes and therefore more frequent arbitrage opportunities. This leads to a higher rate of impermanent loss realization, as the pool is constantly being rebalanced.

However, high volume also generates more trading fees for the liquidity providers, which often offsets or even exceeds the impermanent loss, making the position profitable overall.