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Glossary · I
Impermanent Loss
The temporary reduction in dollar value experienced by liquidity providers in an AMM pool when the price ratio of their deposited tokens diverges from the time of deposit. If prices revert to the original ratio, the loss disappears — hence 'impermanent'. The greater the price divergence, the larger the IL: a 2× price move causes ~5.7% IL, a 5× move causes ~25.5% IL vs simply holding both tokens. Trading fees earned can offset IL if volume is sufficient.
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