So, for the purposes of this example let’s assume 1 ETH = 100 AVAX and 100 AVAX = 1 ETH. The farmer provides liquidity on an AMM and deposits 100 AVAX and 1 ETH, and then receives the ‘receipt’ (LP) token. In the event that the price of AVAX starts to increase as more and more people are purchasing AVAX, the pool adjusts the ratio to ensure the value remains split 50:50 across AVAX and ETH. Now, 1 ETH is suddenly only worth 50 AVAX because of the price jump in AVAX. But because the protocol automatically adjusted the amount of tokens in the pool, the farmer lost out on the AVAX rally partially.