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What Is ‘Impermanent Loss’ in the Context of Decentralized Finance (DeFi) Liquidity Pools?

A temporary loss for liquidity providers due to asset price divergence compared to holding, realized only upon withdrawal from the pool.
Greeks.Live07.11.25

What Is ‘Impermanent Loss’ in the Context of Decentralized Finance (DeFi) Liquidity Pools?

Impermanent Loss (IL) is the temporary loss of funds a liquidity provider experiences when the price of the deposited assets changes compared to simply holding them in a wallet. It occurs because the AMM rebalances the pool to maintain the required ratio.

The loss is 'impermanent' because it only becomes permanent if the provider withdraws the funds.

Explain the Concept of ‘Impermanent Loss’ in AMM Liquidity Pools
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What Is Impermanent Loss and How Does It Affect Liquidity Providers in Decentralized Finance (DeFi)?

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