Impermanent Loss Explained | Binance Academy
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Impermanent loss is when you provide cryptocurrency to a liquidity pool, and the price of your deposited tokens changes since you deposited them.
Key Takeaways Impermanent loss happens when the price ratio of your tokens changes compared to when you deposited them in a liquidity pool. The larger this change, the greater the potential loss relative to simply holding the tokens (HODLing). This means you could end up losing money by providing liquidity to DeFi pools. It comes from an inherent design characteristic of a special kind of market called an automated market maker (AMM). Providing liquidity to a liquidity pool can be profitable, but you’ll need to keep the concept of impermanent loss in mind to avoid potential losses.…
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