What is impermanent loss?

Impermanent loss is the gap between the value of assets held in an AMM liquidity pool and the value they would have if you had simply held them in your wallet. It arises because the pool automatically rebalances toward the asset that is falling in relative price.

How is impermanent loss calculated for a 50/50 pool?

For a constant-product pool, if one asset's price changes by a factor k relative to the other, the loss is 2 times the square root of k, divided by (1 plus k), minus 1. A 2x price move gives about a 5.7 percent loss; a 4x move about 20 percent.

Why is it called impermanent?

The loss is only realised if you withdraw while prices are diverged. If the price ratio returns to where it started, the loss disappears. It becomes permanent only when you exit the position at a different ratio than you entered.

Do trading fees offset impermanent loss?

Yes. Liquidity providers earn a share of trading fees, which can more than compensate for impermanent loss in high-volume, low-volatility pools. This calculator shows the loss before fees, so compare it against your accumulated fee income to judge net profitability.

Does the direction of the price move matter?

No. Impermanent loss depends only on the magnitude of divergence, not the direction. A doubling and a halving of the relative price both produce the same 5.7 percent loss, because the constant-product formula is symmetric around the starting ratio.

What is the Impermanent Loss Calculator?

Enter the price change of one asset relative to the other in a two-asset constant-product AMM pool to compute impermanent loss as a percentage, and compare the value of holding versus providing liquidity. Supports Uniswap V2 style 50/50 pools. Essential for DeFi yield farmers. It runs free in your browser on Gera Tools, with nothing uploaded.

Impermanent Loss Calculator

Name: Impermanent Loss Calculator
Creator: Gera Tools
License: https://creativecommons.org/licenses/by/4.0/

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When you provide liquidity to an automated market maker like Uniswap V2, the pool rebalances your two assets as their prices move — and that rebalancing can leave you worse off than if you had simply held the tokens. That gap is impermanent loss. This calculator quantifies it exactly for a 50/50 constant-product pool and shows the holding-versus-LP comparison in both percent and dollars.

How it works

For a constant-product pool, the only input that matters is the price ratio change k (the new price of asset A relative to asset B, divided by the old ratio). The closed-form impermanent loss is:

IL = 2 × √k / (1 + k) − 1

value if held (HODL) = initial value × (1 + k) / 2      (per unit, normalised)
value in pool (LP)   = initial value × √k               (per unit, normalised)
IL %  = (LP / HODL) − 1
IL $  = deposit value × IL %

The result is always zero or negative and is symmetric: k = 2 and k = 0.5 both give the same loss, because the formula depends only on how far the ratio has diverged, not which way.

Worked example

Suppose you deposit $10,000 — $5,000 in ETH and $5,000 in USDC — and ETH doubles in price relative to USDC, so k = 2. Your LP position is worth about $14,142, but if you had simply held both tokens it would be worth $15,000. The impermanent loss is roughly $858, or about 5.7 percent of the holding value. If ETH then falls back to the original ratio, the loss disappears and your LP value matches what holding would have given.

A 4x price divergence widens that gap to around 20 percent; a 10x move to roughly 42 percent. These numbers accelerate sharply at high divergences, which is why LP strategies in low-volatility, high-volume pools — stablecoin pairs or tightly correlated assets — tend to work out better than volatile asset pairs.

Fees versus impermanent loss: the actual decision

Impermanent loss in isolation does not determine whether providing liquidity is profitable. Every swap that passes through the pool generates a fee, a share of which accrues to you. If fees accumulate faster than impermanent loss grows, you come out ahead of simply holding. The tool shows your loss figure; compare it against the fee income your position has earned (available from the pool analytics) to judge net profitability.

When impermanent loss becomes permanent

The loss is only “impermanent” in the sense that it reverses if prices return to entry. The moment you withdraw liquidity at a diverged ratio, the loss crystalises and is no longer recoverable from that position. Leaving liquidity in and waiting for reversion is a valid strategy, but it ties up capital and carries smart-contract and counterparty risk.

Concentrated liquidity pools (Uniswap V3 style)

This calculator models the classic 50/50 constant-product formula used by Uniswap V2 style pools. Concentrated liquidity (Uniswap V3) amplifies both fee earnings and impermanent loss within the chosen price range, and the math differs. The result here gives you the benchmark for the simpler model; actual V3 positions need a range-aware calculation.