What is impermanent loss in yield farming?

Impermanent loss If the value of one token in a pair changes, the ratio of tokens in the pool will be altered. This can result in users withdrawing from the pool with more of one token than the other. This could ultimately result in a loss depending on how the market moves.

The threat of Impermanent Loss comes when there is a sizeable change in the price of one or both assets staked by the farmers into a liquidity pool . When it happens, oftentimes the loss outweighs the reward they receive from fees. When you stake CAKE as an individual asset in any of the eligible pools on pancakeswap.

Liquidity pool impermanent loss happens when the price of a token increases or decreases after you deposit them in a liquidity pool . This change is considered a loss when the dollar value of your token at the time of your withdrawal becomes less than its amount at the time of deposit.