Impermanent loss in three sentences:
Take a constant-product pool as an example. When one token doubles in price relative to the other, impermanent loss is about 5.7%.
When token prices change, arbitrage traders buy the appreciating token from the pool and add the depreciating token, leaving the pool with fewer and fewer of the appreciating tokens.
Trading pairs whose token prices are very similar, such as two stablecoins, usually have very little impermanent loss.
$UNI 7.247 (-3.39%)
#UNI
Take a constant-product pool as an example. When one token doubles in price relative to the other, impermanent loss is about 5.7%.
When token prices change, arbitrage traders buy the appreciating token from the pool and add the depreciating token, leaving the pool with fewer and fewer of the appreciating tokens.
Trading pairs whose token prices are very similar, such as two stablecoins, usually have very little impermanent loss.
$UNI 7.247 (-3.39%)
#UNI