Is Impermanent Loss a Guaranteed Loss for an LP? ⎊ Path

Is Impermanent Loss a Guaranteed Loss for an LP?

No, impermanent loss is not a guaranteed loss. It is only realized if the LP withdraws their assets when the price ratio is divergent.

If the asset prices return to the ratio at which the LP deposited, the impermanent loss is zero. Furthermore, if the accrued trading fees exceed the impermanent loss, the LP can still realize a net profit.

It is a temporary opportunity cost, not a certainty.

What Role Does Market Sentiment Play in the Perceived Opportunity Cost?

What Is the Primary Mechanism That Offsets Impermanent Loss for Liquidity Providers?

How Does the CEX’S Fee Structure Compare to an RFQ Platform’s Model?

What Is ‘Impermanent Loss’ for a Liquidity Provider in an AMM?

How Does the Concept of “Realized Loss” Apply to IL?

Why Is It Called “Impermanent” Rather than “Permanent” Loss?

What Is the Concept of ‘Impermanent Loss’ in the Context of DeFi Liquidity Provision?

How Do Concentrated Liquidity Pools Attempt to Mitigate Impermanent Loss?

Glossar

Impermanent Loss

Exposure ⎊ Impermanent loss, a risk inherent in automated market maker (AMM) protocols and liquidity provision, arises from price divergence between assets deposited and their subsequent value upon withdrawal.