Crypto

Impermanent Loss Calculator

Calculate the impermanent loss of providing liquidity to an AMM pool. Compare the value of your LP position against simply holding the tokens.

Quick Answer

Impermanent loss occurs when the price ratio of tokens in a liquidity pool changes compared to when you deposited. The formula is IL = 2 × sqrt(price_ratio) / (1 + price_ratio) - 1. A 2x price change in one token causes ~5.7% IL, while a 5x change causes ~25.5% IL. Trading fees earned may offset this loss.

Token A Name

Token B Name

Initial ETH Price

Initial USDC Price

New ETH Price

New USDC Price

Initial Investment

Quick Presets

Impermanent Loss Results

Impermanent Loss

1.40%

-$167.84

If You Held (HODL)

$12,000.00

LP Position Value

$11,832.16

Holding vs. Providing Liquidity

HODL Value$12,000.00

100%

LP Position$11,832.16

98.6%

Token Position Comparison

Token	If Held	In LP Pool	Difference
ETH	2.0000	1.6903	-0.3097
USDC	5,000	5,916.08	916.0798

IL Reference Table

Impermanent loss when one token changes price relative to the other.

1.25x change

0.62%

1.50x change

2.02%

1.75x change

3.79%

2x change

5.72%

3x change

13.40%

4x change

20.00%

5x change

25.46%

Disclaimer: This calculator provides estimates for educational purposes only. Actual impermanent loss depends on specific AMM mechanics, fee structures, and concentrated liquidity ranges. DeFi protocols carry smart contract risk, exploit risk, and regulatory uncertainty. Trading fees earned may partially or fully offset impermanent loss. This is not financial advice. Consult a qualified financial advisor before providing liquidity.

About This Tool

The Impermanent Loss Calculator helps DeFi liquidity providers understand the hidden cost of providing liquidity to automated market maker (AMM) pools. When you deposit tokens into a liquidity pool on platforms like Uniswap, SushiSwap, or PancakeSwap, you face a phenomenon called impermanent loss. This occurs when the relative price of the two tokens changes after you deposit, causing the value of your LP position to be less than if you had simply held the tokens in your wallet.

The Impermanent Loss Formula

For a standard 50/50 constant-product AMM (like Uniswap v2), impermanent loss is calculated using the price ratio between the two tokens. If the relative price ratio between the tokens changes from the initial ratio, the IL is:

IL = 2 × sqrt(price_ratio) / (1 + price_ratio) - 1

Where price_ratio is the ratio of how much one token changed relative to the other. If token A doubles while token B stays the same, the price_ratio is 2, giving an IL of approximately 5.72%. The loss is called "impermanent" because it only becomes permanent (realized) when you withdraw your liquidity. If prices return to the original ratio, the loss disappears.

Why Does Impermanent Loss Happen?

AMMs work by maintaining a mathematical relationship between the quantities of two tokens (typically x × y = k in constant-product pools). When external market prices change, arbitrageurs trade against the pool to bring its internal prices in line with the market. These arbitrage trades extract value from the pool, which is the source of impermanent loss. The pool effectively sells the appreciating token too cheaply and buys the depreciating token too expensively relative to the market.

When Is Impermanent Loss Biggest?

IL increases with the magnitude of price divergence between the two tokens. It is symmetric: a 2x increase in price ratio causes the same IL as a 2x decrease. Pools with highly correlated assets (like USDC/USDT or stETH/ETH) experience minimal IL because their price ratio stays relatively stable. Volatile pairs like ETH/small-cap tokens can experience significant IL during large price movements.

Fee Income vs. Impermanent Loss

Liquidity providers earn trading fees (typically 0.3% per trade on Uniswap v2) that can offset impermanent loss. High-volume pools with moderate price volatility may generate enough fee income to make providing liquidity profitable despite IL. The break-even analysis depends on trading volume, fee tier, pool size, and price volatility. Concentrated liquidity positions (like Uniswap v3) earn higher fees per dollar but face amplified impermanent loss within their range.

Strategies to Manage Impermanent Loss

Several strategies can help manage IL exposure: providing liquidity to stablecoin pairs or correlated pairs minimizes price divergence; choosing high-volume pools maximizes fee income to offset IL; using concentrated liquidity ranges strategically can improve returns; and monitoring positions regularly to withdraw before large price movements. Some protocols offer additional token incentives (liquidity mining) that provide returns beyond trading fees, which can make providing liquidity profitable even with significant IL.

Frequently Asked Questions

What is impermanent loss in simple terms?

Impermanent loss is the difference in value between providing liquidity to an AMM pool and simply holding the same tokens in your wallet. When token prices change, the AMM automatically rebalances your position, selling the appreciating token and buying the depreciating one. This rebalancing means you end up with less value than if you had just held. It's called 'impermanent' because the loss reverses if prices return to their original ratio.

How much impermanent loss is typical?

For a standard 50/50 pool: a 1.25x price change causes 0.6% IL, a 2x change causes 5.7% IL, a 3x change causes 13.4% IL, and a 5x change causes 25.5% IL. In practice, stablecoin pairs experience near-zero IL, ETH/stablecoin pairs during moderate market moves might see 2-10%, and volatile pairs can exceed 30% during large price swings.

Can trading fees offset impermanent loss?

Yes, often they can. Liquidity providers earn a share of every trade in the pool (typically 0.3% per swap). In high-volume pools, fee income can significantly exceed impermanent loss. The key factors are: trading volume (higher is better), pool size (smaller pools earn more fees per LP), and price volatility (more volatility means more IL). Many established pools like ETH/USDC on Uniswap have historically been profitable for LPs despite IL.

Does impermanent loss apply to concentrated liquidity (Uniswap v3)?

Yes, but it behaves differently. Concentrated liquidity positions earn higher fees per dollar but face amplified impermanent loss within their range. If the price moves outside your range, you end up holding 100% of the less valuable token. The tighter your range, the higher the potential fees but also the higher the IL. Range management becomes critical for concentrated liquidity positions.

Is impermanent loss always negative?

The term 'loss' is somewhat misleading. IL represents the opportunity cost compared to holding. Your LP position can still be profitable in absolute terms even with IL, especially when including fee income. IL is always zero or negative relative to holding, but the total return (LP value + earned fees) can be positive. The key question is whether fee income plus any token incentives exceed the IL.

How do I minimize impermanent loss?

To reduce IL: provide liquidity to stablecoin pairs (USDC/DAI, etc.) where prices rarely diverge; choose correlated asset pairs (stETH/ETH, WBTC/renBTC); select high-volume pools where fee income offsets IL; consider single-sided staking or lending instead if you're risk-averse; and monitor your positions during periods of high volatility to withdraw before IL grows too large.

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