How to get the item? You can get Loach Pearls from gold amphibians, which like to roam around near water or stones. The little rascals can only be found in Liyue so far. They can only be found in places north of the “Wangshu Inn”. If you stay there on the banks, you should soon be able to spot some. However, there are not too many of them.
What does the item do? In fact, the Loach Pearl is one of the few items that have not yet been useful to the player. Maybe it can be used to make medicine one day. At least, according to its description, it should be well suited for that.