LIQUIDITY PRACTICE / 7 MIN READ

Understand impermanent loss

A liquidity position rebalances as the relative price changes. Its current value can be lower than simply holding the original quantities of each token. This difference is commonly called impermanent loss. Realized fees may offset it, but are not guaranteed to do so.

The word impermanent does not make the loss harmless. Withdrawing crystallizes your current token composition, and an asset may never return to its previous price. Concentrated ranges can make the exposure sharper than a full-range position.