Internet
impermanent loss
What does impermanent loss mean?
The loss a liquidity provider incurs, relative to simply holding, when the prices of the two pooled assets move apart. It's 'impermanent' because it can reverse if prices return, but becomes real on withdrawal.
"ETH pumped hard against the stablecoin side, so my LP position took heavy impermanent loss."
Origin
DeFi term describing an inherent risk of AMM liquidity provision.
Frequently asked questions
What is impermanent loss?
It's the loss a liquidity provider takes, compared to just holding, when the prices of the two pooled assets move apart from each other.
Why is it called impermanent?
Because the loss can reverse if the token prices return to their original ratio; it only becomes permanent when you withdraw.
How do you avoid impermanent loss?
Provide liquidity in stablecoin or tightly-correlated pairs, since impermanent loss grows the more the two assets' prices diverge.
Study it as flashcards or scroll it in Vocabulary Flow — saved to your collection.
