Q » What is impermanent loss in liquidity provision?

02 Nov, 2025

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A » Impermanent loss occurs when providing liquidity to a decentralized exchange (DEX), where the value of deposited tokens diverges compared to simply holding them. This loss happens due to price fluctuations between the paired tokens. While liquidity providers earn fees that can offset this loss, significant price volatility can lead to a scenario where withdrawing liquidity results in lower value than holding the tokens separately.

Michael

03 Nov, 2025

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All Other Answer

A »Impermanent loss occurs when liquidity providers experience a temporary loss due to price fluctuations in the assets they've deposited into a liquidity pool. As the price ratio of the assets changes, the value of the liquidity provider's assets may be lower than if they had simply held them, resulting in an "impermanent" loss that can be mitigated if the prices revert.

David

03 Nov, 2025

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