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You may have seen the values of your tokens constantly change after providing liquidity into a pool. This is due to what is referred to asĀ impermanent loss. The deposited assets in the pool are used by parties to facilitate their swaps; if one asset becomes more in demand than the other (which is reflected in the price it increases), you are left with the difference reflected in the liquidity pool and by extension your individual liquidity position. For example, if you added liquidity for USDC & ETH and the price of ETH increased, you would haveĀ moreĀ USDC andĀ lessĀ ETH.
The reason this loss isĀ impermanentĀ is due to the fact that these assets can return to their original values at the point of time you deposited them. The final amount of tokens you receive is not cemented until you withdraw your liquidity from the pool!
Below are some useful articles (as well as calculators) for projecting token changes based on shifting price metrics:
increased, you would
You may have seen the values of your tokens constantly change after providing liquidity into a pool. This is due to what is referred to asĀ impermanent loss. The deposited assets in the pool are used by parties to facilitate their swaps; if one asset becomes more in demand than the other (which is reflected in the price it increases), you are left with the difference reflected in the liquidity pool and by extension your individual liquidity position. For example, if you added liquidity for USDC & ETH and the price of ETH increased, you would haveĀ moreĀ USDC andĀ lessĀ ETH.
The reason this loss isĀ impermanentĀ is due to the fact that these assets can return to their original values at the point of time you deposited them. The final amount of tokens you receive is not cemented until you withdraw your liquidity from the pool!
Below are some useful articles (as well as calculators) for projecting token changes based on shifting price metrics:
increased, you would