How can I reduce impermanent loss?

Impermanent loss (IL) happens when you provide liquidity to an AMM and the price of your paired tokens diverges from when you deposited — the more the divergence, the bigger the loss relative to just holding both tokens. Here are the practical levers to reduce it:

Choose correlated pairs. IL is driven by relative price movement between the two assets. Pairing two assets that move together (e.g. ETH/wstETH, two stablecoins, two blue-chip L1s) keeps the ratio roughly stable and IL near zero. Pairing ETH with a meme coin is the worst case — wide divergence, big IL.

Prefer stablecoin pairs when you want yield, not price exposure. USDC/DAI pools have near-zero IL by design. You trade away upside for safety, but there's effectively no IL.

Pick pools with concentrated liquidity and lower fees (Uniswap V3). Concentrated ranges let you deploy capital where you expect prices to trade, which reduces the capital you have "in the water" exposed to divergence. Just know you pay the cost when price exits your range.

Use protocols with IL mitigation built in. Some DEXs pay yield that can offset IL over time, and there are IL-protection vaults (e.g. protocols that compensate losses from swap fees). These don't eliminate IL — they try to make the fee income cover it.

Keep the holding period short or the deposit size small. IL compounds the longer price drifts apart and the larger the position relative to your portfolio. Treat LP positions as a trade with an exit plan, not a set-and-forget.

Don't add to a position after one leg has already moved a lot. You'd be entering at the worst divergence point and "buying" the loser at a high IL state.

The one thing that genuinely can't be avoided: if the pair diverges and stays there, the impermanent loss becomes permanent. Fees and yields are the only compensation, so a low-volume pool with thin fees can quietly lose you money even with good pairs.

If you're trying to pick a specific pool or compare a few DEXs' fee structures, I can check which venues list the pairs you care about and how they compare. Want me to look at anything specific?