Impermanent Loss

Impermanent Loss (IL) is the temporary loss a liquidity provider (LP) may experience on Uniswap when the price ratio between the tokens in a liquidity pool changes. It is a mathematical characteristic of Uniswap V2 AMM pools, not a bug. The greater the price movement from the entry point, the higher the impermanent loss. This can be partially offset by trading fees earned from the pool.