What is impermanent loss?

What Is Impermanent Loss?

When you provide liquidity to an AMM pool, you deposit two assets (e.g. ETH and USDT). If the price ratio of the two changes, when you withdraw you may have less value than if you had simply held both. That difference is "impermanent" loss (it can reverse if price ratio reverts). Fee income can offset it. Understand IL before providing liquidity. In India, the net result (fees minus IL) can affect your tax when you withdraw.