What's Impermanent Loss?

Because one (or both) of the tokens may experience volatility, the USD worth of the liquidity provider's funds may decrease upon liquidity removal or generate lower returns compared to simple HODL. This situation is known as Impermanent Loss. Pools where both tokens are stablecoins are immune to this market condition. The higher the volatility of one token against the other, the higher the likelihood of impermanent loss.

Impermanent loss occurs when the value of the assets you put into a liquidity pool has changed since you deposited them. The bigger the change, the more prone you are to impermanent loss. In this case, "loss" means lower dollar price compared to that at the time of deposit.

You can read more about impermanent loss here.

This material serves educational purposes only. The information contained herewithin does not constitute an investment, financial, legal, or tax advice, and it is not an offer or solicitation to purchase or sell any financial instrument.