Impermanent Loss Calculator

Calculate IL for AMM pools and compare with HODL strategy.

LP Entry Prices

Asset prices at time of deposit

Token A Price ($)

Token B Price ($)

Current Prices

Asset prices at time of exit

Current Token A ($)

Current Token B ($)

Net IL (%)

-1.19%

Effective loss vs. HODL

USD Divergence

$1,871.43

-$1,871.43 TOTAL

Yield Buffer Needed

1.0%

Fees to break even

Strategy Comparison

Hold vs. Liquidity Provision

HODL Value$7,800

LP Pool Value$5,928.57

Strategy Verdict

"To stay profitable, your liquidity pool must earn at least $1,871.43 in trading fees to offset the asset price divergence."

Divergence Curve

Projected IL based on asset price changes

Impermanent Loss Math

We use the standard Constant Product (x*y=k) formula used by Uniswap V2. IL = (2 * sqrt(priceRatio)) / (1 + priceRatio) - 1. This identifies the 'opportunity cost' of providing liquidity.

What is IL?

Impermanent loss occurs when the price ratio of your pooled assets changes. You are effectively selling the asset that outperforms and buying the one that underperforms, resulting in less value than simply holding.

The Fee Hedge

Trading fees are your defense against IL. If the APR from fees is higher than the annualized IL, your position remains profitable. High-volume, low-volatility pools are the IDEAL target.

Asset Correlation

LPs look for assets that move together (high correlation). If both tokens drop 50% together, you have ZERO impermanent loss, only the base market exposure.

Toxic Flow

Arbitrageurs are the ones 'taking' your profit. During rapid price moves, they drain value from the pool before the AMM price can adjust, leaving LPs with the divergence loss.

Frequently Asked Questions

Is impermanent loss really 'impermanent'?

It is called 'impermanent' because if the asset prices return to their original ratio (when you deposited them), the loss disappears. However, if you withdraw your assets when the prices have diverged, the loss becomes real and PERMANENT.

How do trading fees help against IL?

When you provide liquidity, you earn a percentage of every trade in that pool. These fees are added to your position. If the total fees earned are greater than the impermanent loss, your position is profitable even if a price divergence occurred.

Which pairs have the highest risk of IL?

Pairs with low correlation and high volatility have the highest IL risk. For example, a stablecoin paired with a highly volatile meme coin. On the other hand, correlated pairs like ETH/stETH have very low IL risk.

Does IL happen if both tokens go up in price?

Yes. IL is not about whether you gained or lost money in absolute terms, but about how much more you would have had if you just HELD the tokens separately. If one token goes up 100% and the other goes up 50%, you still experience some IL.