Impermanent loss is one of the most recognised risks for investors when providing liquidity to Automated Money Market (AMM). Although it is not an actual loss incurred from the liquidity providing (LP) position but rather an opportunity cost when compared to simply buy and hold the same assets, the possibility of getting less value back at withdrawal is enough to keep many investors away.
Impermanent loss is driven by the volatility between the two assets in the equal-ratio pool — the more one asset moves up or down relative to the other asset, the more impermanent loss is…
