Impermanent loss (IL) is typically explained from the perspective of a liquidity provider [→]. In this glossary, however, we will keep the definition broader and more general.
Whenever you have money in a financial scheme, whether an investment or a market, and there is a potential to gain or lose value, you can experience an impermanent loss if the value temporarily drops. It is called impermanent because the loss only becomes permanent or realized if you withdraw from the scheme before the value recovers.
This phenomenon can also occur when you invest in the stock market, where price fluctuations create temporary unrealized losses until you sell or the asset goes completely bust with no chance of recovery in any way.
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