Impermanent Loss: LP Position Trails Simple Holding

The example is a useful reminder that liquidity provision is a structurally different exposure, not a yield overlay on an unchanged portfolio. The gap shown is a mechanical consequence of the pool rebalancing into the weaker asset as prices diverge, so fee income has to clear that drag before an LP position earns its keep. For LPs weighing pool participation against passive exposure, the relevant question is whether fees and incentives consistently outpace divergence across the pairs they actually hold. Whether the framing shifts capital allocation decisions is the open question.