Impermanent Loss Calculator
Impermanent Loss FAQ
What is impermanent loss?
It’s the loss you experience when providing liquidity compared to simply holding the tokens due to price changes between them.
Why is it called impermanent?
Because the loss only becomes permanent when you withdraw. If prices return to original ratios, the loss disappears.
How can I reduce impermanent loss?
By providing liquidity to stablecoin pairs (like USDC/DAI) or pairs with low volatility.
Can trading fees offset impermanent loss?
Yes. Liquidity providers earn fees, which may compensate for impermanent loss depending on trading volume.
Does impermanent loss always mean losing money?
Not necessarily. You can still have profits, but they may be smaller than just HODLing the tokens.
Which pools are most risky?
Volatile pairs like ETH/ALT or ALT/ALT are more prone to impermanent loss compared to stablecoin pools.
What is Impermanent Loss in DeFi?
Impermanent Loss (IL) occurs when you provide liquidity to an Automated Market Maker (AMM) like Uniswap, PancakeSwap, or SushiSwap, and the relative prices of the tokens you deposited change compared to when you deposited them. As a result, the value of your pooled assets may be lower than if you had simply held (HODLed) the tokens outside the pool.
For example, if you deposit an equal value of ETH and USDC into a pool and the price of ETH rises significantly, the AMM will rebalance the pool by selling some ETH to maintain a 50/50 ratio. When you withdraw, you’ll end up with less ETH and more USDC. If ETH appreciated a lot, your total pool value could be lower than just holding ETH and USDC separately. That difference is the impermanent loss.
The term “impermanent” is used because the loss is only realized if you withdraw your funds while the price ratio remains changed. If token prices return to their original ratio, the loss disappears. However, in practice, price changes are often permanent, making IL a real risk for liquidity providers.
This calculator estimates impermanent loss by comparing the value of your liquidity pool share against the value of simply holding the two tokens. It shows how much percentage difference exists between the two strategies, given the price changes of Token A and Token B.
Liquidity providers often offset IL with trading fees and incentives, but it’s important to understand this risk before providing liquidity. The higher the volatility between the two tokens, the greater the potential impermanent loss.