Impermanent Loss

Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change, the more you are exposed to impermanent loss. Impermanent loss is considered "impermanent" because the price of the asset could revert back to the price it was when you deposited it to the pool. Impermanent loss becomes permanent when you remove an asset from the pool and the price has not returned to the original price when it was deposited. There is also opportunity cost in impermanent loss, as the assets which are experience "impermanent" loss cannot be reallocated into a potentially better-performing asset.

Example:

Let's say you put 20 NFTs in the LP, with a 5% delta, and all of a sudden the price goes up by x10 from the initial price. In that case, you would have been better off just holding the NFTs than selling them along the way, and as a result you experience impermanent loss. Impermanent because the price of the NFT can then go down, and you are not at a loss anymore.

You can learn more about impermanent loss by watching this video.