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LPs and Impermanent Loss
It's not a loss until you sell!

Here's the skinny on impermanent loss:

Simply holding an asset during large price movements will provide the greatest ROI. LPs will always underperform a basic holding strategy. However, this is only true if the price movement is large enough, the emissions don't exist and you aren't receiving trading fees.

Here's the fat on impermanent loss:

The value of a liquidity pair is equivalent to the value of its composite assets right? Basic math. A pair of USDC/DAI with one token of each is worth a grand total of two dollars. Easy.
But things get tricky when the assets aren't stable and we introduce time into the equation. See, liquidity pairs must retain their ratio. So, if the price of one asset rises or falls compared to its paired asset the whole pair must be rebalanced. This is done by selling some of the more valuable asset for more of the other asset.
Think of your entire LP position like a scale . You've got asset A on one arm of the scale and Asset B on the other. You need this scale to be balanced. If asset A moons one day, its side of the scale is going to get a lot heavier. Your scale is mad off kilter. How can we correct this? We have to remove some portion of A to the B side of the scale. This is done through the automated buying and selling of these assets.
Don't panic though, this selling and buying of assets is actually a service you pay insane fees for in traditional finance: Risk-Balance Adjustment. In DeFi the service paradigm is flipped and instead traders chasing arbitrage are consistently re-balancing your liquidity provisions to meet that required balance and paying YOU for the privilege to do so! Epic win.

Further Reading

If my explanation left you more confused then ever or you just want more detail, there are a plethora of resources on this topic. Here are some select examples:
Test it yourself:
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