How Does the Concept of “Divergence Loss” Offer a More Accurate Description than Impermanent Loss?
The term "divergence loss" is considered more accurate because the loss is caused by the divergence of the token prices from their initial ratio, and the loss is only "impermanent" in a theoretical sense. Once the LP withdraws, the loss is realized and permanent.
Divergence loss clearly communicates the mechanism (price divergence) and the consequence (loss of value relative to HODL), avoiding the misleading implication that the loss will likely disappear.
