What Is the Relationship between Impermanent Loss and High Volatility?

Impermanent loss is directly proportional to the magnitude of the price divergence between the two tokens in the pool. High volatility increases the probability and magnitude of this price divergence, thereby increasing the risk and potential size of impermanent loss.

Pools with highly correlated assets (like stablecoins) have lower IL risk, while pools with volatile, uncorrelated assets have higher IL risk.