Some of you might not be aware that you can actually miss out on gains while staking your Moons or maybe you don't know how it works (just like I didn't know until today).

How does impermanent loss happen? (easy example)

Let's imagine two guys. I've chosen typical US names because most of you are from the US: Cleetus and Tyler. Both will invest $3200.

• Cleetus buys ETH along with his Moons because you can only provide liquidity with two Tokens that are being traded on SushiSwap. He holds 8,000 Moons and 1 ETH, which is both the same amount in USD (1,600USD). He will earn x% APY for providing liquidity.
• Tyler decides to hodl. He buys 16,000 Moons instead.

One year later

ETH didn't make any big moves and is still around 1,600USD, while a Moon is now worth $0,80.

• A liquidity pool has to hold equal worth of Tokens. Arbitrage traders took advantage of that and exchanged Moons for ETH. As a result, Cleetus now holds 2,000 Moons and 4 ETH. That's $9,600, nice! He also earned 5% APY.
• Tyler still has his juicy 16,000 Moons, they are now worth $12,800

As a result, Cleetus missed out on gains. Still, it is called impermament loss. As long as they don't sell, it's not realized. But if you believe in the future of Moons, you will also believe that they will do better than ETH in a bullrun. ETH already has almost 9,000x of Moon's market cap!

tl;dr

Your staking reward has to be high enough to cover for impermanent loss in the future. If Moons climb much faster than ETH, you will suffer impermanent loss.