Impermanent loss calculator

What is impermanent loss?

Impermanent loss is the percentage difference between holding tokens in a liquidity pool versus simply holding them in your wallet. It is expressed as a negative percentage that grows larger as the price ratio between the two pooled tokens diverges from the original ratio at deposit time.

Impermanent loss (IL) is the difference between what your tokens would be worth if you had simply held them versus what they are worth inside a liquidity pool. When you provide liquidity to a decentralized exchange, the pool constantly rebalances your tokens as prices change. It sells your winning token and buys more of the losing one. This automatic rebalancing means you always end up with less total value than a simple buy-and-hold strategy.

The word "impermanent" is misleading. The loss only reverses if the price ratio between the two tokens returns to exactly where it was when you deposited. In practice, that rarely happens, which is why many DeFi researchers prefer calling it divergence loss. If you want a deeper explanation with step-by-step math, read our full guide on what is impermanent loss.

The calculator below lets you plug in real numbers and see the exact dollar cost of IL for any price move. It assumes a standard 50/50 constant-product AMM pool where Token B is a stablecoin pegged to $1.

Impermanent loss reference table

This table shows impermanent loss for common price changes. The loss is the same whether the price rises or falls by the given ratio.

How the formula works

Impermanent loss for a standard 50/50 constant-product pool depends only on the price ratio — how much the price of one token has changed relative to the other. The formula is:

The formula returns a percentage that represents how much less your LP position is worth compared to simply holding. For instance, a result of -0.057 means a 5.7% impermanent loss percentage.

Here, price_ratio = current price / initial price. Some key observations:

• IL depends only on the ratio, not on whether the price went up or down. A 2x increase and a 50% decrease produce the same IL (about 5.7%).
• IL is always zero when the price ratio is 1 (price has not changed).
• IL grows at an accelerating rate. Small moves cost almost nothing, but large moves get expensive fast.
• IL can never exceed 100%. Even in the extreme case where one token goes to zero, you lose at most 100% versus holding.

To get dollar amounts, we compare two scenarios:

• Hold value: Half the deposit stays in Token A (which changed price) and half stays in Token B (stable). Hold value = deposit / 2 * price_ratio + deposit / 2.
• LP value: Hold value * (1 + IL). Since IL is negative, the LP value is always less than or equal to the hold value.

When impermanent loss matters

IL is a real cost, but it is not the only factor. The question every liquidity provider should ask is: do the fees I earn outweigh the impermanent loss?

In pools with high trading volume and tight price ranges (like stablecoin pairs), fees often far exceed IL. In volatile small-cap pools with thin volume, IL can easily wipe out months of fee income in a single price swing. If you are bullish on a token and expect it to rally significantly, providing liquidity means the pool will sell your position all the way up — simply holding would have been more profitable.

Concentrated liquidity (as in Uniswap V3) amplifies both sides: you earn more fees per dollar of capital, but IL is also magnified. If the price moves outside your chosen range, 100% of your position converts to the weaker token.

When fees compensate for IL

Fees tend to offset IL in the following conditions:

• Stablecoin pairs — USDC/USDT, DAI/USDC. Price ratios barely move, so IL is near zero and fees accumulate steadily.
• Correlated pairs — ETH/stETH, ETH/WETH. Designed to trade near 1:1.
• High volume relative to pool size — A pool earning 50% APR in fees can absorb significant IL and still be profitable.
• Incentivized pools — Protocols often distribute reward tokens to LPs, adding a layer of compensation on top of trading fees.

Fees rarely compensate when tokens are highly volatile with low trading activity, or when one token in the pair experiences a major price breakout.

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