Impermanent loss

Impermanent loss is the gap between holding tokens in a liquidity position versus simply holding them in your wallet. It appears when the pooled tokens’ relative price changes, and concentrated-liquidity ranges make it sharper because your exposure shifts fast as price moves.

It’s called "impermanent" because it can shrink if price returns to where you entered — but if you exit while price has moved, the loss is realized. On Uniswap V3, tighter ranges amplify both fees and impermanent loss.

Automation does not remove impermanent loss, but it manages it: staying in range and compounding fees can offset it, and stop-loss can cap the downside.