Impermanent loss: what it means for crypto tax
Impermanent loss is the paper loss a liquidity provider can suffer when pooled token prices diverge. It only becomes a realised, potentially deductible loss when you withdraw from the pool, another reason DeFi positions need careful tracking.
General information, not tax advice. Crypto tax rules differ by country and change over time, verify against your country's guidance or a qualified advisor.
An example
While you are in a pool the loss is only on paper; it becomes real when you withdraw and see what you get back versus what you put in.
Why it matters for your tax
Because it is realised only on withdrawal, not while the position fluctuates, the timing of when a DeFi loss counts is easy to get wrong.
CryptaTax handles this automatically across your wallets and exchanges, so the concept is applied consistently without you tracking it by hand. Try the crypto tax calculator →
Related terms
See the full crypto tax glossary for every term, or the crypto tax guides for how they fit together.
FAQ
Impermanent loss is the paper loss a liquidity provider can suffer when pooled token prices diverge. It only becomes a realised, potentially deductible loss when you withdraw from the pool, another reason DeFi positions need careful tracking.
See the crypto tax glossary for related terms, or the crypto tax guides for worked examples. Rules differ by country, so check your country's rules.