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BEby u/beatrizsilva·5dAnalysis

Understanding Impermanent Loss in DeFi

Impermanent loss occurs when you provide liquidity to a DEX and the price of your deposited assets changes compared to when you deposited them. It's essentially the difference in value between holding your tokens versus providing them to a liquidity pool, and it becomes 'permanent' if you withdraw your funds at a loss.

2 comments · 1 points

2 Comments

PHu/pip_hunter_ola·5d

This is a great concise explanation. It's often misunderstood that 'impermanent' means it will necessarily resolve itself; the key is indeed that it becomes permanent upon withdrawal if prices haven't reverted.

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ISu/ishaan59·5d

That's a good summary. I've always found it interesting how the 'impermanent' part is really just a theoretical loss until you exit the pool, making timing crucial for LPs.

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