Impermanent Loss Calculator
Print| Price Ratio Change (k) | 0.00x |
| Pool Value vs HODL | 0.00% |
Providing liquidity to Automated Market Makers (AMMs) like Uniswap, PancakeSwap, or Curve allows crypto investors to earn passive trading fees. However, liquidity providers face a unique mathematical risk known as Impermanent Loss (IL). Impermanent loss occurs when the price ratio of your pooled crypto assets diverges from when you initially deposited them.
Our free Impermanent Loss Calculator helps DeFi investors measure pool risk. By comparing the value of your liquidity pool tokens against simply holding those same tokens in a private wallet, you can determine if yield farming returns outweigh impermanent loss.
How Impermanent Loss is Calculated
For standard 50/50 constant-product liquidity pools (x × y = k), impermanent loss depends strictly on the relative price change ratio (k) of the two pooled assets.
The Impermanent Loss Formula:
Impermanent Loss (%) = [ (2 × √k) / (1 + k) ] - 1
- k (Price Ratio): The new price of Asset A relative to Asset B divided by the initial deposit price ratio. (e.g., If Asset A doubles in price while Asset B stays flat, k = 2.0).
Impermanent Loss Percentage Table
Notice that impermanent loss occurs whether the price ratio moves UP or DOWN. Any divergence in price ratio causes loss relative to holding:
| Asset Price Change Multiplier (k) | Impermanent Loss (%) | Impact vs. Holding in Wallet |
|---|---|---|
| 1.25x (25% Price Increase) | -0.6% | Minor loss; easily covered by trading fees. |
| 1.50x (50% Price Increase) | -2.0% | Moderate loss. |
| 2.00x (100% / 2x Price Spike) | -5.7% | Significant portfolio drag. |
| 3.00x (3x Price Spike) | -13.4% | Severe portfolio drag. |
| 4.00x (4x Price Spike) | -20.0% | Heavy loss relative to HODL strategy. |
| 5.00x (5x Price Spike) | -25.5% | Quarter of total pool value lost to arbitrageurs. |
Step-by-Step DeFi Example
Imagine depositing 1 ETH ($3,000) + 3,000 USDC ($3,000) into a 50/50 liquidity pool for a total deposit of $6,000.
- ETH surges to $6,000 (a 2x price increase, k = 2).
- If you simply held 1 ETH + 3,000 USDC in a wallet, your portfolio is now worth $9,000.
- Because of arbitrage rebalancing inside the AMM pool, your pool position is now worth $8,485.
Impermanent Loss = $8,485 (Pool Value) - $9,000 (HODL Value) = -$515 (-5.72%)
If the pool collected more than $515 in trading fee rewards during your deposit period, your net yield remains positive!
Frequently Asked Questions (FAQ)
Why is it called “Impermanent” Loss?
It is called “impermanent” because the loss is only realized on paper while the tokens remain in the pool. If the asset prices return to their exact original price ratio before you withdraw your liquidity, the impermanent loss vanishes completely back to 0%.
How do liquidity pools offset impermanent loss?
Liquidity pools charge swap trading fees (e.g., 0.30% per trade on Uniswap v2) distributed to LPs. If trading volume is high, cumulative trading fees and yield farming rewards often exceed the impermanent loss percentage, resulting in net positive returns.
Do stablecoin pools suffer from impermanent loss?
Virtually zero! Stablecoin liquidity pools (like USDC/USDT or DAI/USDC) trade assets pegged 1:1 to the US dollar. Because the price ratio (k) stays at 1.0, impermanent loss is practically zero, making stablecoin pools popular for low-risk yield farming.