How it works
AMM rebalancing means the pool automatically sells some of the asset that rises and buys some of the one that falls. Fees can offset part of the difference.
What to check
Compare liquidity-provider value with a hold-only benchmark and include earned fees, incentives and gas costs.
- Compare with a hold benchmark
- Include fees and incentives
- Do not assume divergence will reverse
Limits and risks
The loss can become permanent when liquidity is withdrawn. The term 'impermanent' should not be interpreted as meaning the loss will necessarily reverse.
Primary sources
Bitcoin Developer Reference↗Ethereum developer documentation↗FATF: Virtual Assets↗General information only. Investment products can lose value, and terms, fees and regulation can change.