What is Impermanent Loss?. Impermanent loss is the value you would have had by holding tokens versus providing them to a pool that rebalances as prices move.
How it works
When one token rises relative to the other, the pool sells some of the winner to maintain the ratio, reducing your exposure to the rally.
Why it matters
Fees and incentives can offset the loss, but not always—know the trade‑off before providing liquidity.
Common pitfalls
- Providing liquidity to highly volatile pairs without hedges
- Ignoring fee rates and volume
- Assuming “impermanent” means guaranteed recovery
Quick example
If one asset doubles while the other stays flat, your pool position underperforms holding; fees may or may not cover the gap.
See also
- Liquidity Pool
- DEX
- Hedging
TL;DR: What is Impermanent Loss? defined in plain English with practical next steps.
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