What is impermanent loss?

Impermanent loss is a risk when providing liquidity. It is the difference in value between depositing two cryptocurrency assets within an Automated Market Maker-based liquidity pool or simply holding your assets in a wallet. You can also see this in your analytics.

Firstly, you may not lose any money, but rather your gains are less relative to if you had just left your assets untouched. On the other hand, losses can be amplified depending on how the market moves.

The phrase earns its name because losses are only accepted once the funds are withdrawn from the liquidity pool. Until then, any losses are only on paper and may reduce or disappear entirely depending on how the market changes.

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