Information
What Is Impermanent Loss in DeFi?
Impermanent loss describes how the value of assets in a liquidity position can compare with simply holding those assets, when their relative prices change. Learn why it occurs and why it is not the only risk to consider.
Why relative prices matter
When token prices move relative to each other, an automated market maker may rebalance the assets held in a pool. The resulting position can be worth less than holding the same initial assets outside the pool.
Fees do not guarantee a profit
Trading fees may offset some of the difference, but there is no guarantee they will. The outcome depends on price movements, fees, position design, and timing.
Evaluate the whole position
Consider token volatility, concentrated-liquidity ranges where relevant, fees, gas costs, and smart-contract risks. This concept is educational, not a prediction of future returns.
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