Impermanent loss is a phenomenon observed in AMM pools. It’s the difference in value between holding the tokens together in a liquidity pool and separately as assets in your wallet over time. The divergence in relative price between the two tokens in a pool (extracted by arbitrageurs maintaining the pool balance) results in Impermanent loss.
Impermanent loss is made permanent or realized when the LP removes liquidity from the pool. Highly correlated assets i.e. USDC-USDT suffer less IL than uncorrelated assets like WETH-APE.
Realistically, impermanent loss is just a form of opportunity cost. And thus mitigating it requires a user to be able to predict how asset prices are going to move in the future.
