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What Is Impermanent Loss and Why Does It Occur?

When your funds are added to a liquidity pool, they are exposed to Impermanent loss. Although impermanent loss is not realized until the tokens are withdrawn from the liquidity pool. This loss typically can be amplified by volatility on a trading pair and occurs when the ratio of the tokens in the liquidity pool becomes uneven. 

The typical way to calculate this type of loss is by comparing the value of your tokens in the liquidity pool versus the value of simply holding them. Stable coins have price stability, so liquidity pools that utilize stable coins can be less exposed.