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What Is the Risk of ‘Impermanent Loss’ in a Liquidity Pool?

Impermanent loss is the temporary loss in value when a deposited asset's price changes relative to the other asset in the pool.
Greeks.Live07.11.25

What Is the Risk of ‘Impermanent Loss’ in a Liquidity Pool?

Impermanent loss occurs when the price of the tokens deposited in a liquidity pool changes compared to when they were deposited. The loss is "impermanent" because it only becomes a permanent loss if the liquidity provider withdraws their tokens at that moment.

It happens because the AMM maintains a constant ratio of value between the tokens.

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