Plain-English definition
When you supply two assets to a pool and their relative price changes, the pool rebalances you into more of the loser and less of the winner. Compared to simply holding, you end up behind. That gap is impermanent loss.
It is only impermanent if prices return to where they started, which they often do not. Liquidity providers earn fees to compensate for this risk; whether the fees cover it is the whole game.
Why it matters
Impermanent Loss matters because crypto markets can look precise while still being shallow, crowded, or poorly sourced. A useful read is not just the number. It is the number, the size behind it, the context around it, and the part it cannot explain.
Simple example
A simple Impermanent Loss example is a reader comparing two venues with the same headline price but different depth. The deeper venue can absorb more capital before the trade, peg, or yield reading starts to move against the user.
How Bathymark uses this term
Bathymark uses Impermanent Loss to translate open market data into live liquidity readings. When the term touches a live page, the reading links back to the relevant chain, protocol, stablecoin, DEX, perps, or Signal so the source remains checkable.
Common mistake
The common mistake is treating Impermanent Loss as a complete signal by itself. Bathymark treats it as one instrument: useful when read beside liquidity, source, size, and what the number cannot prove.