1. What Is Impermanent Loss?
Impermanent loss, or IL, occurs when funds deposited in a liquidity pool become worth less than simply holding the assets, or HODLing.
2. Why Does It Happen?
The pool maintains two tokens at a 50:50 value ratio. When one token's price changes substantially, the pool automatically rebalances by selling the rising token and buying the falling token.
3. The Size of the Loss
📊 Price Change vs. IL
1.25× change: IL = 0.6%
1.5× change: IL = 2.0%
2× change: IL = 5.7%
3× change: IL = 13.4%
5× change: IL = 25.5%
A 2-fold price change produces only 5.7% IL,
but a 5-fold or larger move, as with memecoins, can mean a loss of 25% or more.
4. How to Minimize IL
- Stablecoin pairs — USDT/USDC pools have almost no IL.
- Highly correlated pairs — Such as ETH/stETH.
- Concentrated liquidity — Specify a range in Uniswap V3.
- High fee income — Fees that exceed IL.
5. AI Trading Has No IL
NOONOO TRADING does not use liquidity pools, so impermanent loss does not occur. It seeks returns purely from price changes.
🃏 AI Trading Without IL
See straightforward, effective AI trading as an alternative to complex DeFi.
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