Search

What is Impermanent Loss?

Updated: Oct 27

Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.


Pools that contain assets that remain in a relatively small price range will be less exposed to impermanent loss. Stablecoins or different wrapped versions of a coin, for example, will stay in a relatively contained price range. In this case, there’s a smaller risk of impermanent loss for liquidity providers (LPs).

7 views0 comments

Recent Posts

See All

What is a DEX?

A decentralized exchange (DEX) is a peer-to-peer (P2P) marketplace that connects cryptocurrency buyers and sellers. In contrast to centralized exchanges (CEXs), decentralized platforms are non-custodi

What is a Governance Token?

Governance tokens are tokens that developers create to allow token holders to help shape the future of a protocol. Governance token holders can influence decisions concerning the project such as propo

What is a Funding Rate on a Perpetual Swap?

The funding rate is how the price of a perpetual swap is kept close to the price of the underlying asset. It works by sending periodic payments between long and short traders. This is critical: a poor