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What Is Impermanent Loss, and How Does It Affect Liquidity Providers on a DEX?

A temporary loss of value when deposited assets' prices diverge from the deposit price; realized upon withdrawal.
Greeks.Live17.11.25

What Is Impermanent Loss, and How Does It Affect Liquidity Providers on a DEX?

Impermanent Loss (IL) occurs when the price of a deposited asset changes compared to when it was deposited in an AMM liquidity pool. It is the temporary loss of funds due to this price divergence, meaning the value of the tokens held in the pool is less than if they were simply held in a wallet.

IL is only realized as a permanent loss if the liquidity provider withdraws their assets before the prices return to the original ratio.

How Does Impermanent Loss Arise for Liquidity Providers in an AMM Pool?
What Is Impermanent Loss and How Does It Affect Liquidity Providers in Decentralized Finance (DeFi)?
What Is the Risk of ‘Impermanent Loss’ in a Liquidity Pool?
What Is the Risk of “Impermanent Loss” for Liquidity Providers in an AMM?

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