# Impermanent Loss

> A paper loss that liquidity providers see when the prices of their pooled tokens move apart.

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Source: What The Block! Dictionary v1.0 (last updated 2026-04-25), browsable at https://wtb.fudfomo.co.

## Definition

Impermanent loss is the difference between holding two tokens in your wallet and supplying them to a liquidity pool. When the prices move relative to each other, the pool rebalances, and you end up with a different mix than you started with.

The loss is called impermanent because it only locks in if you withdraw while the prices are out of sync. Trading fees from the pool are meant to compensate for it, but on volatile pairs the loss can outpace the fees.

## Related terms

- [Liquidity Pool](https://fudfomo.co/glossary/liquidity-pool): A shared pot of two tokens that lets people trade between them on a decentralised exchange.
- [AMM](https://fudfomo.co/glossary/amm): Automated market maker. The smart contract behind a DEX that prices trades based on the size of two token pools.
- [DEX](https://fudfomo.co/glossary/dex): A decentralised exchange. Trade crypto directly from your wallet, without an account.
- [DeFi](https://fudfomo.co/glossary/defi): Decentralised finance. Apps that offer lending, trading, and saving on a blockchain instead of through a bank.

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