Impermanent Loss

Impermanent loss occurs when the value of assets provided to a liquidity pool changes compared to simply holding them. It is common in decentralised exchanges (DEXs) using automated market makers (AMMs). If token prices shift significantly, the share’s value may be lower. It’s called impermanent because losses may recover if prices return, but withdrawing at the wrong time locks in the loss. Although fees and rewards can offset the loss, it's still a risk to consider.