What is Impermanent Loss｜ Explained for Beginners

💡 Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss.

📚 Read our articles to learn more on Impermanent Loss

⏱️ Timestamps
What is Impermanent Loss 00:00
Why does impermanent loss occur 00:30
Managing impermanent loss risk 2:42

👨🏻‍🎓 Binance Academy - Blockchain and Crypto Explained

[MonsieurCafe]

Now that I understand them I don't like LP anymore

[jonanbahnsen]

So in essence you make a hedge between the 2 pairs. If one of them goes crazy up or down you will only get half of the cost/loss of that asset compared to the other asset. And if both goes up your golden.
But if one goes down and the other one goes up you'll get the midrange of that.

Correct?

[kyrie]

It's "impermanence loss", not "impermanent loss". The wrong term has been propagated and made popular.
"Impermanent loss" means that the loss is not permanent.
As opposed to a loss caused by impermanence of the asset value.
Please take note and don't follow the crowd heading in the wrong direction just because that's where the herd goes!

[PeymanSayyadi]

Thanks for the concise and easy-to-understand explanation.

[BEASTNYC]

good video - On average How long do you hold positions - a week, two weeks...?

[akashsi]

What's even the point of Providing liquidity if one is bound to lose money? For the Benefit of the Arbitrage trader?

[binyam]

Maybe dumb question but what if you just have one crypto you provide to the liquidity or farm

[mcmerry]

Where ia the yield reinvestor in Binance?? Do I have do it manually??

[bogse]

Im not sure but did this video kind of tell you not to do DeFI since you will lose money no matter what direction the cryptos go? Why would someone do this, its better just let them be in wallet or get money from staking. In DeFi your loss (you would gain more if just keep them in wallet) is quaranteed no matter where the price goes.

[BigHushAffiliate]

I just have one question. What is impermanent loss?

[erlendyen]

What happens if the price of your crypto increases? Will you then get a gain when you remove your crypto from the pool? If that is the case it should be called "impermanent loss/gain".

[marcushart]

Better to loan out your crypto and get guaranteed returns.

[alexvid]

What happens if ETH price goes down? Does the ETH multiply in the pool to maintain a constant of 10000 USD?

[JTG]

I could be wrong but it sounds like impermanent lose is that same as investing in a coin and if the price goes down your money goes down but if the price goes up your money goes but as long as you sell high you profit

[pdcdesign]

Impermanent loss: The value of your cryptocurrency could rise or fall while it is staked, creating temporarily unrealized gains or losses. These gains or losses become permanent when you withdraw your coins, and may result in you having been better off if you'd kept your coins available to trade if the loss is greater than the interest you earned.

[mgrkvhp]

Where the money goes - it's the same if Alice sell her 0.5 eth in the middle of the road (actually when price was 200), but here the "sell" is done by someone else

[samson]

Not sure why when Eth goes up in value rather than the pool having 2.5 Eth it has 10 and why there is 2000dai rather than 1000?

[The_Minas]

Impermanent Loss meaning not permanent right? Then if it is not permanent how it will go back to your wallet?

[PapaSupernova]

Wait, so if the value of whatever coins youve added liquidity to goes up then this a bad thing??? Eh?

[MichaelHayesagent]

So yea….. I still feel stupid about this . Is defi just a bunch of people trying to arbitrage coins ? What is the point of a dex?