Impermanent Loss Hedging

Impermanent Loss (IL) is the unrealized loss that automated market makers (AMMs) suffer when assets they hold diverge in price from their initial deposit ratio. When you deposit equal-value pairs into a liquidity pool and prices shift, the AMM algorithm forces you to hold more of the cheaper asset and less of the expensive one—rebalancing you into a losing position. Hedging IL means offsetting this risk through stablecoins, derivatives, range orders, or algorithm design. The goal is to capture trading fees without suffering the rebalancing drag.