# Impermanent Loss

*Crypto & Digital Assets — Finicade finance glossary*

Impermanent loss is the shortfall a liquidity provider suffers versus simply holding both assets, because the pool sells the riser and buys the faller.

Impermanent loss is the shortfall a liquidity provider suffers versus simply holding the two assets, caused by the pool automatically selling the rising asset and buying the falling one. It's only impermanent if prices return to where they started, which is why the name is misleading. A 4× price divergence produces roughly 20% loss against holding, which fee income may or may not cover.

**Also known as:** divergence loss, IL

**Related terms:** [Liquidity Pool](https://finicade.com/glossary/liquidity-pool), [Automated Market Maker](https://finicade.com/glossary/automated-market-maker), [Yield Farming](https://finicade.com/glossary/yield-farming), [Rebalancing](https://finicade.com/glossary/rebalancing), [Decentralized Exchange (DEX)](https://finicade.com/glossary/decentralized-exchange)

Source: https://finicade.com/glossary/impermanent-loss