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The Daily Capital
CRYPTO & DIGITAL ASSETS Β· Lesson 67

Impermanent loss: the math that quietly eats liquidity providers

Daily Desk Β· Editorial5 min read
Your position went up 41% and you still underperformed doing nothing. That gap has a formula, and it gets wider every time the two assets move apart.

You deposit $10,000 into an ETH/USDC pool at $2,000 per ETH β€” 2.5 ETH and $5,000. ETH doubles to $4,000, you withdraw, and the position is worth $14,142. Great trade β€” except if you had just held the 2.5 ETH and the cash, you would have $15,000. You are $858 behind, and you did nothing wrong.

β€” Educational, not financial advice.

Impermanent loss: the math that quietly eats liquidity providers β€” The Daily Capital