AMM Liquidity Providers Can Trail a Hold Strategy as Prices Shift

An automated market maker position can rise in dollar value and still leave a liquidity provider behind a hold strategy, because changing token prices alter what the pool owns. Impermanent loss describes the difference between an automated market maker (AMM) liquidity position and the value of keeping the same starting assets. It is a comparison at a given point in time, not a standalone measure of whether the position made money. A pool position can be worth more than the original deposit and still be worth less than holding those original assets. In a constant-product AMM, traders swap directly against a token pool.

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