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

A temporary loss incurred by a liquidity provider when deposited asset prices diverge from the deposit price, realized upon withdrawal.
Greeks.Live19.11.25

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

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

The loss is "impermanent" because it is only realized if the LP withdraws their assets before the prices return to the original deposit ratio.

What Is “Impermanent Loss” in the Context of AMMs and Liquidity Provision?
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What Is ‘Impermanent Loss’ in the Context of Decentralized Finance (DeFi) Liquidity Pools?

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