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What Is “Impermanent Loss” in the Context of DeFi Liquidity Pools?

Loss in value of assets deposited in a liquidity pool due to price ratio change, compared to holding.
Greeks.Live28.10.25

What Is “Impermanent Loss” in the Context of DeFi Liquidity Pools?

Impermanent loss is the temporary difference in value between simply holding two assets in a wallet versus depositing them into an automated market maker (AMM) liquidity pool. It occurs when the price ratio of the deposited tokens changes after deposit.

The loss is "impermanent" because it can be reversed if the token prices return to their original ratio. It is a major risk for liquidity providers.

Does Impermanent Loss Occur If Both Assets in the Pool Rise in Value?
How Does an Automated Market Maker (AMM) Work?
How Do Tokens Facilitate Decentralized Finance (DeFi)?
What Is “Gas” in the Context of the Ethereum Blockchain?

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