Impermanent Loss Calculator for DeFi LP Positions

What Is Impermanent Loss and How Does It Arise?

Impermanent loss is the difference in value between holding your tokens in a liquidity pool versus simply holding them in your wallet, caused by the price of one token diverging from the other. When you provide liquidity to an automated market maker (AMM) such as Uniswap or Curve, the pool rebalances your position as prices move so that it always holds equal value of each token. That rebalancing means you sell the token that rises and buy the token that falls — which is exactly the opposite of what a buy-and-hold investor would do, and it is what produces the loss.

The loss is called "impermanent" because it only becomes real when you withdraw your liquidity. If the price ratio returns to its original level before you exit, the loss disappears entirely and your position is worth the same as if you had held. This is why liquidity providers are compensated with trading fees — the fees are meant to offset the impermanent loss they take on while prices move.

The Standard 50/50 Formula

For a standard 50/50 pool, if token A's price changes by a factor k relative to token B, the impermanent loss as a fraction of your initial value is IL = 2√k / (1 + k) − 1. The table below shows how the loss grows with the size of the price move. A 1.25× move costs about 0.6%, a 2× move about 5.7%, and a 4× move about 20%. Notice that the loss is symmetric in a sense — a halving and a doubling of the price produce the same impermanent loss, because the formula depends on the ratio k and its reciprocal in the same way.

Impermanent Loss vs. Holding

The calculator compares two scenarios for the same initial deposit. If you hold, your tokens are worth V·(1+k)/2 after the price change. If you provide liquidity, your position is worth V·√k. The impermanent loss is the gap between these two values. Because the pool always rebalances toward equal value, the LP position always trails the holding position whenever prices diverge — the only way to avoid impermanent loss is for the price ratio to stay unchanged.

When Impermanent Loss Is Worth Accepting

Providing liquidity can still be profitable despite impermanent loss, because trading fees and yield rewards can exceed the loss. The decision depends on the pool's fee tier, trading volume, and how volatile the token pair is. Pairs with low volatility and high volume tend to generate enough fees to outweigh impermanent loss, while highly volatile pairs can lose more to impermanent loss than they earn in fees. Always compare the expected fee income against the impermanent loss for the likely range of price moves before committing capital.