Impermanent Loss Calculator
Calculate how much impermanent loss you face when providing liquidity to an AMM pool. Enter token prices, your liquidity amount, and pool fee APR to see whether fees cover the risk.
What Is Impermanent Loss?
Impermanent loss (IL) is the cost of providing liquidity to an automated market maker (AMM) compared to simply holding your tokens in a wallet. It occurs because AMM pools like Uniswap, SushiSwap, and PancakeSwap use a constant product formula (x × y = k) to maintain balance between two tokens. When the relative price of one token changes, the pool rebalances automatically — and you end up with more of the cheaper token and less of the expensive one.
The term "impermanent" is somewhat misleading. The loss is real in dollar terms, but it is unrealized as long as you stay in the pool. If prices revert to the original ratio, the loss disappears entirely. However, if you withdraw at a different ratio, the loss becomes permanent.
Impermanent Loss Formula
IL = 2 × √r / (1 + r) − 1
Where r = (new price ratio) / (original price ratio). The result is always negative or zero — it represents the percentage loss compared to holding.
How Much Loss at Different Price Changes?
The relationship between price divergence and IL is non-linear. Small price changes cause very little IL, but large swings hurt significantly:
- 1.25x price change: ~0.6% IL
- 1.5x price change: ~2.0% IL
- 2x price change: ~5.7% IL
- 3x price change: ~13.4% IL
- 5x price change: ~25.5% IL
Example
$10,000 liquidity in ETH/USDC pool — ETH doubles in price
- Initial: $5,000 ETH + $5,000 USDC
- If held: $10,000 USDC + $10,000 ETH = $15,000
- In pool: rebalanced to ~$7,071 ETH + ~$7,071 USDC = $14,142
- Impermanent loss: $858 (5.72%)
When Is Providing Liquidity Still Worth It?
The key question is whether fee income exceeds the impermanent loss. Pools with high trading volume relative to their liquidity depth generate substantial fees. A pool earning 30% APR in fees can comfortably absorb a 5-10% IL from moderate price changes.
Strategies to minimize IL include choosing stablecoin pairs (USDC/USDT), correlated pairs (stETH/ETH), using concentrated liquidity on Uniswap V3 carefully, and diversifying across multiple pools. Some protocols like Bancor have offered IL protection, though these mechanisms have had mixed results.
This calculator shows your break-even fee APR — the minimum fee income needed to offset the impermanent loss. If the pool's actual APR exceeds that number, you're profitable despite the IL.