DeFi guide

What Is Impermanent Loss?

Impermanent loss is the difference between the value of tokens held inside a liquidity pool and the value of the same tokens if they were simply held in a wallet. It appears when the relative price of the pooled assets changes after liquidity is deposited.

This guide will explain how AMM rebalancing creates the LP vs HODL gap, how the standard 50/50 formula works and where fees, pool design and withdrawal timing can change the final result. It is educational content only and is not financial advice.