Impermanent Loss Calculator

Frequently Asked Questions

What is impermanent loss?

The value gap between providing liquidity to a 50/50 pool and simply holding the two assets, caused by the pool rebalancing as prices diverge. IL = 2√r ÷ (1+r) − 1, where r is the price ratio change.

Why "impermanent"?

If relative prices return to the deposit ratio, the loss disappears. It only becomes permanent when you withdraw while prices are still divergent.

How big can it get?

A 2× price move of one asset ≈ 5.7% IL; 4× ≈ 20%; 5× ≈ 25%. Trading-fee income must exceed IL for LPing to beat holding.

How do I offset it?

Fees and incentive rewards. Compare expected fee APR to projected IL for your volatility view. This is educational, not financial advice.

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Estimates for informational purposes only.

Important Disclaimer: Estimates for informational purposes only.

This calculator provides estimates for informational purposes only. Results are based on assumptions and may not reflect actual outcomes. Consult qualified professionals in relevant fields before making important decisions based on these results.

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How This Calculator Works

Impermanent loss (IL) is the opportunity cost of supplying two assets to a 50/50 automated market maker (AMM) pool instead of simply holding them. When the volatile asset's price moves, arbitrageurs rebalance the pool - the constant-product invariant x × y = k forces it to sell the rising asset and buy the falling one, so an LP ends up with relatively more of whatever underperformed. Let r = price now ÷ price at deposit. The exact closed-form for a constant-product pool is IL = 2√r ÷ (1 + r) − 1, which is always ≤ 0 and equals 0 only when r = 1. The tool computes two position values: HODL value = deposit × (0.5 + 0.5r) (half stayed in the volatile asset, half in the stable side), and pool value = HODL × (1 + IL). It then estimates trading-fee income as deposit × fee APR × (days ÷ 365) and derives the break-even fee APR that exactly cancels the IL at the entered price move.

Worked Example

Deposit $10,000 (so $5,000 ETH + $5,000 stablecoin) while ETH is $2,000. ETH rises to $3,000 → r = 3000 ÷ 2000 = 1.5. IL = 2√1.5 ÷ (1 + 1.5) − 1 = (2 × 1.2247) ÷ 2.5 − 1 = 0.9798 − 1 ≈ −2.02%. HODL value = $10,000 × (0.5 + 0.5×1.5) = $10,000 × 1.25 = $12,500. Pool value ≈ $12,500 × 0.9798 ≈ $12,247 - an IL of about $253. If the pool yields 15% fee APR over 90 days, fee income ≈ $10,000 × 0.15 × (90 ÷ 365) ≈ $370, which more than covers the $253 shortfall, so net vs. HODL is roughly +$117. The break-even APR here is about $253 ÷ $10,000 ÷ (90÷365) ≈ 10.3%.

Real-World Use

Liquidity providers on Uniswap, Curve, Balancer, or PancakeSwap use this to decide whether a pool's advertised yield actually compensates for divergence risk. The single most actionable output is the break-even fee APR: if the pool's realized fee yield is below it at the price move you expect, you would have been strictly better off just holding the two tokens. It also explains why stable–stable pairs (USDC/USDT) carry almost no IL while volatile–volatile pairs require fat fee APRs to be worthwhile.

Common Mistakes

Thinking only an up-move causes IL. It is symmetric - a price halving (r = 0.5) produces the same −2.02% as a 50% rise (r = 1.5). Only how far r diverges from 1 matters.

Believing it is only "on paper". It is impermanent only while you remain in the pool at that price; withdrawing (or the price never reverting) makes it permanently realized.

Ignoring that IL stacks on price losses. If the volatile token also crashed in absolute terms, you lose both the directional drawdown and the IL versus holding.

Chasing headline APRs. Very high advertised yields often exist because divergence risk (and emission dilution) is high - the market is pricing the risk you are taking.

Limitations

This models a classic constant-product 50/50 pool only. It does not capture concentrated-liquidity (Uniswap v3) ranges - where IL is amplified inside the range and the position goes 100% one-sided outside it - nor stable-swap curves, weighted pools, gas costs, slippage, or reward-token emissions that can offset losses. Fee income is a flat APR assumption, not actual realized trading volume, which is lumpy and pool-specific. Use this as an educational estimate of divergence risk, not financial advice - LP positions can and do lose money even when the APR looks attractive.

Impermanent Loss Calculator

Frequently Asked Questions

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