impermanent loss
When a liquidity provider loses money compared to just holding their coins.
Impermanent loss happens when you deposit two different cryptocurrencies into a liquidity pool (a smart contract that lets traders swap between them). If the price of one coin moves significantly compared to the other, you end up with fewer valuable coins than if you had simply held them separately. The loss is “impermanent” because it only becomes real if you withdraw your funds; if prices move back to where they started, the loss disappears.
Liquidity pools exist because decentralized exchanges need pools of coins to function—traders swap against them, and liquidity providers earn fees for supplying those coins. However, impermanent loss is the hidden cost of providing liquidity. When you see this term in financial news, it usually signals discussion about whether the fees earned justify the risk of price swings, or whether liquidity providers are being adequately compensated for potential losses.
Written once as a plain-English reference, not as advice. Nothing here is a recommendation to buy or sell anything.