Providing liquidity is effectively writing a straddle on relative price movement. Three quick checks before you act: 1. Name the mechanism in plain English: Automated Market Makers force you to sell your winning asset and buy your losing asset to maintain ratios. This causes divergence loss compared to just holding. 2. Say why it matters for behavior or portfolio decisions: If the trading fees do not compensate for the divergence loss, providing liquidity destroys capital. 3. Set the review question: Explain in one sentence what problem this idea solves and what problem it does not solve. In real life: Providing liquidity to an ETH/USDC pool right before ETH doubles means you capture severely muted upside as the pool sells your ETH the whole way up. Common slip: Seeing huge LP yield percentages and ignoring the risk of massive impermanent loss. That is usually where the edge is: not in the vocabulary, but in the structure underneath it.