Impermanent Loss Calculator
Calculate liquidity pool risk and compare LP vs HODLing
Token A
Token B
Investment Details
Optional: Expected annual fee earnings
When to Use Impermanent Loss Calculator
Before Providing Liquidity
Evaluate potential risks before depositing tokens into Uniswap, SushiSwap, or PancakeSwap pools. Understand worst-case scenarios at different price movements to make informed decisions about which pools match your risk tolerance.
Active Position Monitoring
Track your existing LP positions in real-time. Check current impermanent loss against trading fee earnings to decide if it's time to withdraw or if staying longer will recover losses through accumulated fees.
Pool Comparison
Compare impermanent loss across different token pairs. Stablecoin pools like USDC/DAI have minimal IL but lower fees. Volatile pairs like ETH/ALT tokens have higher IL but potentially higher fee earnings. Find your optimal balance.
Risk Assessment
Model different scenarios based on expected price movements. If you anticipate one token pumping 3x, you'll face 13.4% IL. Knowing this helps you decide if potential fee earnings justify the risk or if simple holding is better.
Yield Farming Strategy
Calculate whether yield farming rewards can offset IL. Many farms offer additional token incentives. Factor in these rewards plus trading fees to determine true APY and whether the farm is profitable despite impermanent loss exposure.
Educational Purpose
Learn how AMM mechanics work by experimenting with different price scenarios. Understanding impermanent loss is crucial for anyone serious about DeFi. Use this tool to build intuition about how liquidity provision differs from holding.
Frequently Asked Questions
What is impermanent loss in DeFi?
Impermanent loss happens when you provide liquidity to an AMM pool and the price ratio of your deposited tokens changes. Your share value becomes less than if you had simply held the tokens. It's called "impermanent" because the loss can reverse if prices return to the original ratio, but becomes permanent when you withdraw.
How do I calculate impermanent loss?
Enter the initial and current prices for both tokens in your liquidity pool. The calculator uses the formula: IL = 2 * sqrt(price_ratio) / (1 + price_ratio) - 1. For example, if one token doubles in price, you'll have approximately 5.7% impermanent loss compared to just holding the tokens.
Can trading fees offset impermanent loss?
Yes, trading fees earned from the liquidity pool can offset or exceed impermanent loss. High-volume pools generate more fees. Use our calculator to input your expected APR from fees to see if the rewards outweigh the impermanent loss over your investment timeframe.
When is impermanent loss highest?
Impermanent loss increases with larger price divergence between the two tokens. A 2x price change results in 5.7% loss, 3x results in 13.4% loss, 4x results in 20% loss, and 5x results in 25.5% loss. The more volatile the price ratio, the higher the impermanent loss.
How can I minimize impermanent loss?
Choose pools with correlated assets like ETH/WETH or stablecoin pairs like USDC/DAI. These maintain similar price movements, reducing divergence. Alternatively, look for pools with high trading volumes to maximize fee earnings that can offset impermanent loss.
Is impermanent loss the same as actual loss?
Not exactly. Impermanent loss measures the opportunity cost versus holding tokens. Your LP position still has value and earns fees. The "loss" is relative to what you would have had by simply holding. When you withdraw, any impermanent loss becomes realized and permanent.
Does impermanent loss apply to all DeFi protocols?
Impermanent loss primarily affects constant product AMMs like Uniswap, SushiSwap, and PancakeSwap. Different AMM designs like Curve's stableswap or Balancer's weighted pools have different IL characteristics. Single-sided staking or lending protocols don't have impermanent loss.
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