What Is Impermanent Loss?
Impermanent loss (IL) occurs when you provide liquidity to an Automated Market Maker (AMM) pool and the price ratio of your deposited tokens changes compared to when you entered. The AMM automatically rebalances your position, resulting in a different token distribution than if you had simply held (HODL) the tokens.
How Is Impermanent Loss Calculated?
For a standard 50/50 pool, the formula is:
IL = 2√r / (1 + r) - 1Where r is the price ratio change between the two tokens. For example, if Token A doubles in price while Token B stays the same, r = 2 and IL ≈ -5.72%.
For weighted pools (like Balancer's 80/20 pools), the formula generalizes to:
IL = (P_A^w_A × P_B^w_B) / (w_A × P_A + w_B × P_B) - 1Where P_A and P_B are price change ratios, and w_A and w_B are pool weights.
| Price Change | Impermanent Loss | Impact Level |
|---|---|---|
| 1.25x | -0.6% | Low |
| 1.5x | -2.0% | Low |
| 2x | -5.7% | Moderate |
| 3x | -13.4% | Moderate |
| 5x | -25.5% | High |
| 10x | -42.0% | Critical |
How to Use the Impermanent Loss Calculator
Set Up Your Pool
Select the pool weight that matches your liquidity pool. Most DEXes like Uniswap use 50/50 pools, while Balancer supports custom weights like 80/20 or 70/30. Then enter your total investment amount in USD.
- 50/50 — Standard Uniswap, SushiSwap pools
- 80/20 — Balancer weighted pools (less IL)
- 70/30 or 60/40 — Custom Balancer configurations
Enter Token Prices
For each token in the pair, provide accurate pricing data:
- Initial Price — The token price when you deposited liquidity
- Current Price — The token's current market price
You can also customize the token names (default: ETH/USDC) to match your actual trading pair. The calculator shows the price change percentage for each token in real time.
Add Fee Earnings (Optional)
Enter the Pool Fee APR and Days in Pool to calculate how much you've earned from trading fees. This helps determine whether your fee income offsets the impermanent loss.
Analyze Results
The calculator displays comprehensive metrics to evaluate your position:
Impermanent Loss %
HODL Value
LP Value
Fee Earned
Net vs HODL
Position Breakdown
Position Breakdown
The breakdown table shows exactly how many tokens you would have in each scenario (HODL vs LP), helping you understand how the AMM rebalanced your position.
Original Token Amounts
- Maintains initial token quantities
- No rebalancing occurs
- Value changes with market prices
- Simple to track and understand
Rebalanced Amounts
- More of the cheaper token
- Less of the expensive token
- Automatic arbitrage rebalancing
- Earns trading fees continuously
Features
Weighted Pool Support
Calculate impermanent loss for different pool configurations with varying weight ratios.
- 50/50 (Uniswap, SushiSwap)
- 80/20, 70/30, 60/40 (Balancer)
- Weighted pools have less IL
- Dominant token reduces exposure
Real-Time Price Tracking
See percentage changes for each token with instant visual feedback.
- Green indicators for price increases
- Red indicators for price decreases
- Live percentage calculations
- Instant position updates
Fee Earnings Offset
Factor in pool fee APR and time to see if trading fees compensate for IL.
- Calculate fee income over time
- Net vs HODL comparison
- Green when LP beats holding
- Profitability assessment
Interactive IL Curve Chart
Visualize how impermanent loss changes across different price ratios.
- Red marker shows current position
- Understand IL progression
- Predict future scenarios
- Visual risk assessment
Position Breakdown
Compare exact token quantities between HODL and LP positions.
- See AMM rebalancing effects
- More cheap tokens, less expensive
- Detailed quantity comparison
- Understand portfolio shifts
IL Quick Reference Table
Collapsible reference showing IL values for common price changes in 50/50 pools.
- 1.25x to 10x price changes
- Quick estimations without inputs
- Standard 50/50 pool reference
- Educational resource
Frequently Asked Questions
What causes impermanent loss?
Impermanent loss occurs because AMM pools must maintain a mathematical relationship between token quantities (constant product formula). When one token's price changes relative to the other, arbitrage traders rebalance the pool, leaving you with more of the relatively cheaper token. The resulting portfolio is worth less than if you had simply held the original tokens.
Is impermanent loss always negative?
Yes, impermanent loss is always zero or negative. It equals zero only when the price ratio between tokens remains unchanged (both tokens move by the same percentage). Any divergence in relative prices causes IL, regardless of which direction prices move.
- Zero IL: Both tokens move identically (e.g., both +50%)
- Negative IL: Any price divergence between tokens
- Positive IL: Never possible in standard AMM pools
Can trading fees offset impermanent loss?
Yes. Liquidity providers earn a share of trading fees from every swap in the pool. If the fee income exceeds the impermanent loss, the LP position is more profitable than holding. Use the Fee APR and Days in Pool inputs to estimate whether fees compensate for your IL.
| Pool Type | Typical Fee APR | IL Compensation |
|---|---|---|
| Stablecoin Pools | 5-15% | Excellent |
| Major Pairs | 15-40% | Good |
| Volatile Pairs | 40-100%+ | Variable |
Why is it called "impermanent"?
The loss is only realized when you withdraw liquidity. If token prices return to their original ratio before you withdraw, the loss disappears entirely. However, if you withdraw while prices are diverged, the loss becomes permanent.
Unrealized Loss
- Prices diverged but not withdrawn
- Can recover if prices revert
- Still earning trading fees
- Reversible situation
Realized Loss
- Liquidity withdrawn during divergence
- Loss locked in permanently
- Cannot recover from price reversion
- Final outcome determined
Do weighted pools have less impermanent loss?
Yes. Pools with unequal weights (like 80/20) experience less IL than 50/50 pools because the dominant token has a higher allocation. An 80/20 pool with ETH as the 80% token will have roughly 60% less IL than a 50/50 pool for the same price movement.
Example: For a 2x price change, a 50/50 pool experiences -5.72% IL, while an 80/20 pool only experiences approximately -2.29% IL — a significant reduction in risk exposure.
Does this calculator account for concentrated liquidity (Uniswap V3)?
This calculator models standard (full-range) AMM pools like Uniswap V2 and Balancer. Concentrated liquidity positions (Uniswap V3/V4) have amplified impermanent loss within their price range, which requires a different calculation model.
- Full-range pools: Lower fees, lower IL risk
- Concentrated liquidity: Higher fees, higher IL risk
- V3/V4 requires active management
- Different calculation methodology needed
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