What Is ‘Impermanent Loss’ in a Locked Liquidity Pool?

Impermanent loss is the temporary loss of funds a liquidity provider experiences when the price of their deposited assets changes compared to simply holding them in their wallet. It occurs because the Automated Market Maker (AMM) algorithm rebalances the pool to maintain the value ratio.

The loss is 'impermanent' because it only becomes permanent if the assets are withdrawn at that point.