#Understanding Impermanent Loss
One of the main considerations for someone adding assets to traditional liquidity pools is the risk of impermanent loss (IL). Don't be fooled by the strange name - the effect can be very permanent indeed.
#To more easily understand how and why IL happens, it will help to understand some basic mechanics behind liquidity pools, and the concept of arbitrage trading.
For simplicity's sake, know that for any given pool on any platform, the ongoing price of the tokens in that pool is affected only by buy/sell pressure within that pool. The overall market conditions don't directly affect it at all. Traders taking advantage of this price difference will, and this is arbitrage trading.
What this means is that if you are providing OSMO and BNB in a pool, and the overall market price of BNB drops sharply, traders can still come and sell their BNB to this pool at the higher price and take a larger amount of your OSMO from that pool. The more BNB sold to the pool the lower the price will go, while the opposite is true for OSMO. This typically continues until the prices of the tokens in that pool to very near average market price, and there is no longer a financial incentive to continue.