Impermanent Loss Calculator
Calculate impermanent loss for liquidity provision in AMM pools. Compare holding vs providing liquidity.
Frequently Asked Questions
What is Impermanent Loss?
Impermanent loss is the difference between providing liquidity in an AMM and simply holding your assets. It occurs when the price ratio of the deposited assets changes.
How is IL calculated?
IL is calculated by comparing the value of your LP position to the value if you had simply held the same assets. The formula uses the price ratio of the two assets.
Can fees offset impermanent loss?
Yes, trading fees earned from providing liquidity can offset or even exceed impermanent loss, especially in high-volume pools.
Is impermanent loss permanent?
It is only permanent if you withdraw your liquidity while the price has diverged. If prices return to your entry ratio, the IL disappears.
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What is this tool?
Impermanent loss is the difference between holding tokens in a liquidity pool versus holding them outside the pool. It occurs when token prices diverge from their initial ratio. IL increases with price volatility and can be calculated as: IL = 2 * sqrt(x) / (1 + x) - 1, where x is the price ratio.
How to use
- 1
Enter initial prices
Input the initial prices of both tokens in the pool.
- 2
Set current prices
Enter the current prices of both tokens.
- 3
View IL calculation
See impermanent loss percentage and dollar amount.
- 4
Compare scenarios
Review IL across different price change scenarios.
Frequently Asked Questions
What is impermanent loss?
IL occurs when LP tokens in a pool lose value compared to simply holding the same tokens outside the pool. It becomes permanent when you withdraw.
How to mitigate impermanent loss?
Earn trading fees to offset IL, use stablecoin pairs, or stake LP tokens for additional rewards. Some protocols offer IL insurance.
Is impermanent loss actually permanent?
It is impermanent as long as you do not withdraw. If prices revert to the initial ratio, the IL disappears. It only becomes permanent upon exit.