Will this pool cost you money?
See exactly how price changes affect your liquidity position — in plain English, not math formulas.
Imagine you own a fruit stand. You start the day with 10 apples and 10 oranges, both worth $1 each — $20 total.
Midday, apples spike to $4 each. A smart shopper comes by and trades you oranges for apples until your stand has the "right" balance. You end up with 5 apples and 20 oranges = $40.
Sounds good? But if you'd just kept your original 10 apples and 10 oranges, you'd have $50 (10 × $4 + 10 × $1).
That $10 gap is impermanent loss. The "automatic rebalancing" of a liquidity pool cost you $10 compared to just holding.
Key things to know:
It's "impermanent" because it reverses if prices return. If both tokens go back to their starting price, your IL goes to zero. It only becomes permanent when you withdraw at a different ratio.
Bigger price swings = bigger IL. A 50% price move causes ~2.02% IL. A 200% move causes ~5.72%. It grows faster than you'd expect.
Trading fees can offset IL. Pools earn fees from every trade. If the pool gets enough volume, fees can exceed IL — making it profitable despite the loss. That's what "Net Yield" measures.
Stablecoin pairs have almost zero IL. If both tokens maintain their peg (like USDC/USDT), prices don't diverge — so IL stays near zero. That's why stablecoin pools are "Safe" on YieldLens.
IL happens regardless of direction. Whether Token A goes up 50% or down 50%, you experience IL. The formula only cares about how much the ratio between the two tokens changed.