Is Impermanent Loss Ever Realized, and If So, When?

Impermanent loss is a theoretical loss until the liquidity provider (LP) withdraws their assets from the pool. The loss is realized only at the moment of withdrawal, as the LP receives the rebalanced assets, whose total dollar value is less than what they would have received had they simply held the original tokens.

If the price ratio returns to the initial deposit ratio before withdrawal, the impermanent loss reverts to zero.