How Does Imperman-Ent Loss in Liquidity Pools Affect the Secondary Token’s Stability?

Impermanent loss introduces volatility to the secondary token. As the price of the primary token fluctuates against the secondary one, arbitrageurs rebalance the pool.

This process can lead to a surplus of the secondary token being sold on the open market, creating downward pressure on its price and thus increasing its instability. This effect is magnified in pools with low liquidity or highly volatile assets.