# Impermanent loss **Impermanent loss** (IL) is the difference in value between holding tokens in your wallet and providing them as liquidity. It happens because the AMM continuously rebalances your position as price moves — selling the appreciating token and accumulating the depreciating one. The loss is "impermanent" because it reverses if price returns to your entry point, but it becomes permanent if you withdraw while price is elsewhere. ### IL in constant product pools In a CPMM pool, the `x × y = k` invariant determines how token balances shift as price moves. The further price moves from your entry, the more the pool rebalances against you — selling the appreciating token and accumulating the depreciating one. | Price change | IL | | ------------ | ------ | | ±25% | −0.6% | | ±50% | −2.0% | | 2x | −5.7% | | 3x | −13.4% | | 5x | −25.5% | IL is symmetric in direction — it doesn't matter whether price goes up or down, only how far it moves from your entry. It's also always negative (or zero). The only question is whether fees earned offset it. ### IL in concentrated liquidity pools In a CLMM pool, you provide liquidity within a range $$\[p\_a, p\_b]$$. Within that range, your position behaves like a constant product pool but with amplified capital efficiency — and amplified IL. The intuition: a CPMM position spreads its capital across the entire price curve, so only a small fraction participates in any given price move. A CLMM position concentrates all its capital in a narrow band, so 100% of it participates in every price move within that range. The same dollar amount of concentrated liquidity rebalances more aggressively than the same dollar amount of full-range liquidity. Tighter range = more fees per dollar = more IL per dollar. Once price exits your range entirely, IL stops increasing — your position has already fully converted to one token. But you also stop earning fees, so there's nothing to offset the loss until price returns. ### When IL becomes permanent IL reverses if price returns to your entry point. But in practice, several things can make it permanent: * You withdraw while price is elsewhere * For CLMM: price exits your range and never returns — your position is stuck as 100% of the depreciating token * The token's price decline is structural (rug, project death), not cyclical ### Fees vs IL IL is not always a net loss. The core tradeoff in liquidity provision is that you accept IL in exchange for trading fees. If accumulated fees exceed IL, you're net positive. This is why fee tier selection and range width matter — they determine both sides of the equation. For volatile pairs, higher fee tiers (30 bps, 100 bps) exist specifically to compensate LPs for the greater IL risk. For stable pairs where prices barely move, IL is negligible and lower fee tiers (1 bps, 5 bps) are sufficient. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.raydium.io/raydium/concepts/impermanent-loss.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.