Impermanent Loss Calculator
Estimate impermanent loss for DeFi liquidity pools. Compare LP returns vs holding, factor in fee income, and decide whether providing liquidity is worth it.
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Pool Settings
Trading fee yield earned by LPs. Check pool analytics for current rates.
Impermanent Loss Analysis
Impermanent Loss
-1.44%
$172.71 lost vs holding
| ETH price change | +40.63% |
| USDC price change | +0.00% |
| HODL value | $12,031.25 |
| LP value (before fees) | $11,858.54 |
| Fee income earned | +$2,000.00 |
| LP value (after fees) | $13,858.54 |
| Net vs HODL | +$1,827.29 |
IL Reference — Price ratio change impact
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Limitations
- •Assumes a standard 50/50 constant product AMM (Uniswap v2 style)
- •Concentrated liquidity pools (Uniswap v3) have different IL dynamics
- •Fee income is estimated linearly — actual fees depend on trading volume
- •Does not account for token incentive rewards or farming yields
- •Gas costs for entering/exiting LP positions are not included
- •Real IL depends on the exact price path, not just start and end prices
This tool provides educational information only. It is not financial, tax, or legal advice. Always consult qualified professionals for decisions about your specific situation. Results are based on general patterns and may not reflect your circumstances.
What Is Impermanent Loss?
Impermanent loss (IL) is the difference in value between holding tokens in a liquidity pool versus simply holding them in your wallet. It occurs because automated market makers (AMMs) continuously rebalance your token holdings as prices change.
The loss is called "impermanent" because it only becomes permanent when you withdraw your liquidity. If token prices return to their original ratio, the loss disappears.
How Is Impermanent Loss Calculated?
For a standard 50/50 constant product AMM, the formula is:
IL = 2 * sqrt(price_ratio) / (1 + price_ratio) - 1
The key insight is that IL depends on the ratio of price changes between the two tokens, not the direction. Whether token A doubles or halves relative to token B, the IL is the same (~5.7%).
When Do Fees Overcome IL?
Liquidity providers earn trading fees from every swap in their pool. If the fee income over your holding period exceeds the impermanent loss, providing liquidity is still more profitable than just holding. High-volume pools with high fee tiers (e.g., 1% fee on volatile pairs) can often generate enough fee income to offset IL.
Strategies to Minimize IL
- Stablecoin pairs: Pools like USDC/USDT have minimal IL since prices stay correlated
- Correlated pairs: ETH/stETH or similar derivative pairs reduce IL risk
- Higher fee tiers: Choose pools with higher fee tiers for volatile pairs
- Short-term positions: Less time exposed means less accumulated IL
- Consider using centralized exchanges for trading if you want to avoid IL entirely