Impermanent loss is most likely to occur when there is significant price volatility in the assets of a liquidity pool. It is particularly prevalent in situations where the assets have a strong correlation, yet experience different price movements. For example, if a liquidity provider deposits an equal amount of Ether (ETH) and a stablecoin like USDT, and the price of ETH rises while USDT remains stable, impermanent loss will be incurred.