Impermanent Loss in Plain English | Glow Matrix Core Field Notes
If you provide liquidity on a Solana AMM, dashboards may show impermanent loss (IL) as a negative percentage. The name suggests the loss is temporary. That is only partially true — and the nuance trips up many first-time LPs.
What the term describes
When you deposit two tokens into a pool, the protocol rebalances your share as prices move. Compared with simply holding those tokens in your wallet, your pool share can be worth less at certain price points. That difference is impermanent loss — "impermanent" because if prices return to your entry ratio, the loss disappears on paper.
Why "impermanent" misleads
Prices often do not return. If one token in the pair trends up and stays there, the IL figure becomes a permanent opportunity cost versus holding. Fee income from swaps may offset it — or may not. The dashboard label alone does not tell you which.
Related vocabulary
Sessions link IL to LP tokens, fee APR, concentrated liquidity range, and out-of-range status. Each term modifies your exposure. An LP position out of range earns no fees until repositioned — a separate risk from IL itself.
Our teaching approach
We use historical pool screenshots (with tokens anonymised) to show when fees compensated IL and when they did not. The goal is literacy: you should read IL metrics as one input among several, not as a reason to avoid all liquidity provision or to ignore it entirely.