Impermanent Loss Calculator
Calculate impermanent loss when providing liquidity to AMM pools. See if pool fee earnings overcome IL and compare LP returns vs simply holding your tokens.
IL at Different Price Changes (Token A vs B)
| Price Δ | IL % | IL $ |
|---|---|---|
| -90% | -42.50% | $425.04 |
| -75% | -20.00% | $200.00 |
| -50% | -5.72% | $57.19 |
| -25% | -1.03% | $10.26 |
| 0% | 0.00% | $0.00 |
| +25% | -0.62% | $6.19 |
| +50% | -2.02% | $20.20 |
| +100% | -5.72% | $57.19 |
| +200% | -13.40% | $133.97 |
| +300% | -20.00% | $200.00 |
| +500% | -30.01% | $300.15 |
Based on constant product AMM (Uniswap V2 style). Concentrated liquidity pools (V3) have different IL characteristics.
How to Use the Impermanent Loss Calculator
- Enter the initial price of your first token when you deposited into the liquidity pool.
- Enter the current price (or projected price) of that same token.
- Input your initial deposit value in USD or your preferred currency for both tokens combined.
- Optionally, add the pool fee tier (0.01%, 0.05%, 0.3%, or 1%) and estimated daily trading volume to calculate potential fee earnings.
- Review the results showing your impermanent loss percentage, the dollar value of IL, your current portfolio value, and whether fees have offset the loss.
- Compare the "LP Value" (your current position with fees) against "HODL Value" (what you'd have by just holding) to determine if liquidity provision was profitable.
What Is Impermanent Loss?
Impermanent loss (IL) is a unique risk that occurs when you provide liquidity to automated market maker (AMM) decentralized exchanges like Uniswap, SushiSwap, PancakeSwap, or Trader Joe. When you deposit two tokens into a liquidity pool, you're exposing yourself to price divergence risk. If the price ratio between your two deposited tokens changes compared to when you deposited them, you will have less value than if you had simply held (HODLed) the tokens in your wallet.
The term "impermanent" is somewhat misleading — the loss only remains impermanent if token prices return to their original ratio. Once you withdraw your liquidity, any loss becomes permanent. In reality, prices rarely return exactly to entry levels, so impermanent loss often becomes realized loss. Understanding how IL works is critical for anyone participating in DeFi liquidity provision or yield farming strategies.
AMMs operate using mathematical formulas rather than order books. The most common formula is the constant product market maker (CPMM) model used by Uniswap V2, where x × y = k. Here, x and y represent the quantities of two tokens in the pool, and k is a constant. When traders swap tokens, they change the ratio of x to y, which changes the price. Arbitrageurs continuously rebalance pools to match external market prices, and during this process, liquidity providers end up with more of the depreciating asset and less of the appreciating one — this rebalancing is what creates impermanent loss.
The Impermanent Loss Formula
IL = 2 × √r / (1 + r) − 1 Where r is the price ratio change, calculated as the new price divided by the old price (r = P_new / P_old). This formula applies to standard 50/50 constant product AMM pools, the most common type found in Uniswap V2, SushiSwap, and similar protocols.
Worked Example: Suppose you deposit $10,000 worth of liquidity into an ETH/USDC pool when ETH is priced at $2,000. You deposit 2.5 ETH and $5,000 USDC. Later, ETH rises to $3,000. The price ratio r = $3,000 / $2,000 = 1.5. Plugging into the formula: IL = 2 × √1.5 / (1 + 1.5) − 1 = 2 × 1.2247 / 2.5 − 1 = 0.9798 − 1 = −0.0202, or about −2.0% impermanent loss. On your $10,000 deposit, that's approximately $200 in IL. Meanwhile, if you had simply held 2.5 ETH and $5,000 USDC, your position would be worth $12,500 (2.5 × $3,000 + $5,000), but your LP position is only worth about $12,247 after accounting for the rebalancing.
Impermanent Loss Reference Table
| Price Change | Impermanent Loss (%) | Example: $10,000 LP |
|---|---|---|
| 1.25× (25% gain) | −0.6% | −$60 |
| 1.5× (50% gain) | −2.0% | −$200 |
| 2× (100% gain) | −5.7% | −$570 |
| 3× (200% gain) | −13.4% | −$1,340 |
| 4× (300% gain) | −20.0% | −$2,000 |
| 5× (400% gain) | −25.5% | −$2,550 |
| 0.5× (50% drop) | −5.7% | −$570 |
Notice that impermanent loss is symmetrical — a 2× price increase or a 0.5× price decrease both result in approximately 5.7% IL. The further the price diverges from your entry point in either direction, the greater the impermanent loss.
When Is Providing Liquidity Still Profitable?
Despite impermanent loss, liquidity provision can still be highly profitable if trading fee earnings exceed the IL. Every swap that occurs in the pool generates fees (typically 0.05%, 0.3%, or 1% per trade depending on the pool and protocol), and these fees are distributed proportionally to liquidity providers. High-volume pools generate substantial fee income that can easily overcome impermanent loss over time.
For example, a pool with a 0.3% fee tier and $10 million in daily trading volume generates $30,000 in daily fees. If the total liquidity in that pool is $50 million, and you provide $10,000 of that liquidity (0.02% of the pool), you would earn approximately $6 per day in fees, or about $2,190 annually — a 21.9% APR from fees alone. If your impermanent loss over that year is only 5%, you're still net positive by about 17% compared to your initial deposit.
The key is to target pools where fee APR significantly exceeds expected IL. Pools with high trading volume relative to their total liquidity (high volume-to-liquidity ratio) tend to generate the best risk-adjusted returns for LPs. Additionally, many DeFi protocols offer liquidity mining rewards — additional token incentives on top of trading fees — which can further offset impermanent loss and boost overall yields.
Strategies to Minimize Impermanent Loss
Provide liquidity to stablecoin pairs: Pairs like USDC/USDT, DAI/USDC, or USDC/BUSD have minimal price divergence, resulting in near-zero impermanent loss. While fee APRs are typically lower on stablecoin pools (since they're less volatile), returns are more predictable and safer for conservative LPs.
Use correlated asset pairs: Pairs like ETH/wstETH (wrapped staked ETH) or wBTC/renBTC tend to move together in price, reducing IL. Similarly, pairs of tokens from the same ecosystem or protocol often exhibit price correlation, making them less risky for liquidity provision.
Concentrate liquidity in narrow ranges: On Uniswap V3 and similar concentrated liquidity protocols, you can provide liquidity within a specific price range rather than across the entire price curve. This boosts capital efficiency and fee earnings but also increases IL if prices move outside your range. Range-bound strategies work best in sideways or low-volatility markets.
Consider single-sided staking: Some protocols (like Bancor, though it has since changed its model) offered single-sided liquidity provision with IL protection. While less common now, single-asset staking vaults and lending protocols allow you to earn yield without IL exposure, though typically at lower rates than AMM LP positions.
Actively rebalance your positions: Advanced LPs monitor their positions and rebalance when IL becomes significant. By withdrawing, rebalancing manually, and re-depositing, you can mitigate some IL — though this incurs gas fees and transaction costs, so it's only worthwhile for larger positions or on low-fee chains.
Concentrated Liquidity and IL (Uniswap V3)
Uniswap V3 introduced concentrated liquidity, allowing LPs to allocate their capital to specific price ranges. Instead of providing liquidity across the entire 0 to infinity price curve, you can concentrate your position between, say, $1,800 and $2,200 for an ETH/USDC pool. This makes your capital far more efficient — if prices stay within your range, you earn significantly higher fees per dollar of capital than you would in a V2-style pool.
However, concentrated liquidity also amplifies impermanent loss. When prices move outside your chosen range, your position stops earning fees entirely, and you're left holding 100% of one asset. The narrower your range, the higher your capital efficiency and fee earnings, but also the greater your IL risk and the higher the chance of going out of range. Managing a concentrated liquidity position requires active monitoring and rebalancing — it's closer to options market making than passive liquidity provision.
For LPs seeking to maximize returns on Uniswap V3, a common strategy is to set ranges slightly wider than recent price action, monitor positions daily, and rebalance when prices approach range boundaries. Alternatively, some LPs use automated liquidity management protocols like Arrakis, Gamma, or Charm that algorithmically adjust ranges to maximize fee capture while controlling IL.
Frequently Asked Questions
Is impermanent loss always negative?
Yes, impermanent loss itself is always zero or negative. It represents the opportunity cost versus simply holding your tokens. A 0% IL means token prices haven't diverged from your entry ratio; any divergence results in negative IL. However, when you combine IL with trading fee earnings (and often liquidity mining rewards), your total return as an LP can be positive and can exceed what you would have earned by just holding the tokens.
Does impermanent loss apply to stablecoin pairs?
Stablecoin pairs like USDC/USDT or DAI/USDC experience minimal impermanent loss because their prices are pegged and rarely diverge significantly. A 1% price difference between two stablecoins results in negligible IL. These pools are favored by risk-averse LPs who want predictable, steady returns from trading fees without the volatility and IL risk of crypto-to-crypto or crypto-to-stablecoin pairs. However, stablecoin pool APRs are typically lower since trading volume and fee tiers are also lower.
How does concentrated liquidity change impermanent loss?
Concentrated liquidity (as in Uniswap V3) amplifies both fee earnings and impermanent loss. By narrowing your price range, you earn a larger share of fees when prices stay in range, but you also face sharper IL if prices move against you. If prices exit your range entirely, you stop earning fees and hold 100% of one token, maximizing your IL. Concentrated liquidity is best suited for active LPs who can monitor and adjust positions regularly, or for use with automated liquidity managers.
When does impermanent loss become permanent?
Impermanent loss becomes permanent when you withdraw your liquidity from the pool. At that point, the divergence loss is realized. As long as your liquidity remains in the pool, there's a chance prices could revert to your entry ratio, erasing the IL. In practice, however, crypto prices are volatile and rarely return to exact previous levels, so IL usually converts to permanent loss upon withdrawal. The name "impermanent" is more of a technical description of the mechanism than a promise that the loss will disappear.
Can I provide liquidity without impermanent loss?
True IL-free liquidity provision is rare. The closest alternatives are single-sided staking (lending your tokens to a protocol rather than an AMM), providing liquidity to stablecoin pairs with pegged prices, or using protocols that offered IL protection (like Bancor v2.1, though this has since changed). Some newer AMM designs experiment with dynamic fees or alternative bonding curves to reduce IL, but most standard AMM pools using the constant product formula will expose you to impermanent loss whenever prices diverge.
How do I track impermanant loss in real time?
Many DeFi portfolio trackers and analytics platforms offer real-time IL tracking. Tools like DeBank, Zapper, Zerion, APY.vision, and Revert Finance allow you to connect your wallet and view current IL, fee earnings, and net LP performance. Additionally, protocol-specific dashboards (Uniswap Analytics, SushiSwap Analytics) provide detailed position breakdowns. For manual tracking, you can use this calculator by inputting your entry price and current price to see your IL percentage and compare it against accumulated fees.
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