# Impermanent Loss

**Impermanent Loss (IL**) happens when the price of the tokens you deposit into a liquidity pool changes compared to when you first provided liquidity. The larger the price movement, the greater the potential IL — even if you’re earning trading fees from the pool. 

In some cases, simply holding the tokens in your wallet could result in a higher total value than providing liquidity.

* **Common in volatile token pairs:** Rapid price swings increase IL risk.
* **Less severe for stable or highly correlated assets:** Pairs like pegged pools (e.g. USDC/USDT, bbSOL/SOL ...) usually have minimal IL.

**Example:**

Imagine you add liquidity to an **ETH-USDC** pool when **ETH = $2,000**. Later, the price of ETH rises to **$3,000**.

* If you simply **held 1 ETH + $2,000 USDC**, your total would be worth **$5,000**.
* But in the pool, due to automatic rebalancing, you now hold **less ETH and more USDC**.
* The combined value of your position might be, for example, **$4,800** instead of $5,000.
* The **$200 difference** is the impermanent loss.

> **Note:** Impermanent Loss only becomes real when you withdraw your liquidity. If the token price returns to its original level, the impermanent loss disappears. Staying in the pool longer and earning trading fees can also help offset any temporary IL.


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