Impermanent loss occurs when the price of tokens you deposited changes after providing liquidity. You suffer a loss compared to simply holding the tokens because the pool automatically rebalances, selling the outperforming asset and buying the underperforming one. This loss is only “impermanent” if the prices return to their original state. If not, the loss becomes permanent upon withdrawal. Understanding this fundamental concept is crucial before committing funds. Despite this risk, many find the fee rewards from Uniswap outweigh the potential downsides in the long run.