Impermanent Loss

defi

A temporary loss of value that can occur when providing liquidity to automated market makers (AMMs) due to price volatility of the paired assets. For example, if you provide 1 ETH and 2000 USDC to a pool, and ETH price doubles, you may end up with fewer ETH tokens when withdrawing due to the automated rebalancing.

Related Terms

Examples

  • • Liquidity provision risk
  • • Price divergence
  • • Temporary loss