Impermanent Loss Calculator
Calculate impermanent loss for liquidity pool positions. Compare holding vs providing liquidity in AMM pools like Uniswap, Curve, and other DeFi protocols.
About This Calculator
Calculate impermanent loss for a 50/50 liquidity pool (like Uniswap v2). Enter the initial and current prices for both tokens to see your IL and compare holding vs LP position value.
Initial Position
Current / Projected Prices
LP Fees Earned (Optional)
Enter fees to see if your position is profitable after accounting for impermanent loss.
If You HELD (No LP)
In Liquidity Pool
Impermanent Loss
5.72%
Impermanent Loss Curve
Quick IL Reference
| Price Change | IL % | On $10,000 |
|---|---|---|
| 1.25x | 0.62% | -$70 |
| 1.5x | 2.02% | -$253 |
| 2x | 5.72% | -$858 |
| 3x | 13.40% | -$2679 |
| 5x | 25.46% | -$7639 |
| 10x | 42.50% | -$23377 |
Break-Even Fee Analysis
To break even at current prices, you need to earn at least $857.86 in fees. That is a 8.58% return on your initial investment.
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About This Calculator
"How much am I really losing to impermanent loss?" If you provide liquidity to DeFi protocols like Uniswap, Curve, or PancakeSwap, this question has probably kept you up at night. Impermanent loss is the hidden cost of being a liquidity provider (LP), and in volatile markets, it can wipe out all your trading fee rewards and then some.
Here is the uncomfortable truth: a study of Uniswap v3 positions found that over 50% of liquidity providers lost money compared to simply holding their tokens. The fees they earned were not enough to offset impermanent loss. Yet with proper understanding and calculation, you can determine exactly when LP positions make sense and when they do not.
This Impermanent Loss Calculator helps you understand the true cost of providing liquidity. Enter your initial token prices, the current or projected prices, and instantly see your impermanent loss percentage, the dollar value you have lost (or could lose), and how it compares to just holding. You can also factor in LP fees earned to see if your position is actually profitable. Whether you are yield farming on Ethereum, providing liquidity on Arbitrum, or exploring DeFi on Solana, understanding impermanent loss is essential for profitable liquidity provision.
How to Use the Impermanent Loss Calculator
- 1**Enter initial token prices**: Input the prices of both tokens (Token A and Token B) when you first provided liquidity to the pool.
- 2**Enter current or projected prices**: Input the current market prices or simulate future price scenarios to see potential impermanent loss.
- 3**Review the impermanent loss percentage**: The calculator shows your IL as a percentage, which is the difference between holding and LP value.
- 4**Compare Hold Value vs Pool Value**: See the exact dollar amounts for both strategies to understand your actual loss.
- 5**Add LP fees earned (optional)**: Enter the fees you have earned to see if your position is profitable after accounting for IL.
- 6**Use preset scenarios**: Click 2x, 3x, or 5x buttons to quickly see IL at common price change levels.
- 7**Analyze the IL curve chart**: Visualize how impermanent loss changes across different price ratios to plan your strategy.
- 8**Decide on your LP strategy**: Use the results to determine if providing liquidity makes sense for your token pair and timeframe.
Formula
IL = 2 * sqrt(price_ratio) / (1 + price_ratio) - 1Impermanent loss is calculated using the price ratio between the two tokens in your liquidity pool. The formula IL = 2 * sqrt(r) / (1 + r) - 1, where r is the price ratio (new_price / original_price), gives the percentage loss compared to holding. For example, if Token A doubles relative to Token B (r = 2), the calculation is: IL = 2 * sqrt(2) / (1 + 2) - 1 = 2 * 1.414 / 3 - 1 = 0.943 - 1 = -0.0572, or -5.72% loss. The loss is "impermanent" because if prices return to the original ratio, the loss disappears. However, if you withdraw while prices are divergent, the loss is realized permanently.
Understanding Impermanent Loss in DeFi
What Is Impermanent Loss?
Impermanent loss (IL) is the difference in value between holding tokens in your wallet versus providing them as liquidity in an AMM (Automated Market Maker) pool. It occurs because AMMs automatically rebalance your position as prices change, effectively selling the appreciating token and buying the depreciating one.
Why "Impermanent"?
The loss is called "impermanent" because it only becomes permanent when you withdraw. If prices return to their original ratio, the loss disappears. However, in practice, prices rarely return to exactly where they started, making the loss very real for most LPs.
The Core Problem:
| Scenario | What Happens | Result |
|---|---|---|
| Token A rises 2x | AMM sells your A for B | You have less A than if you held |
| Token B rises 2x | AMM sells your B for A | You have less B than if you held |
| Both rise equally | No rebalancing needed | No IL (rare scenario) |
| One rises, one falls | Maximum rebalancing | Maximum IL |
Real Example:
You provide $1,000 of ETH and $1,000 of USDC to a pool (total $2,000). ETH doubles from $2,000 to $4,000.
- If you held: $2,000 ETH + $1,000 USDC = $3,000
- In the pool: ~$1,414 ETH + ~$1,414 USDC = $2,828
Impermanent loss: $3,000 - $2,828 = $172, or 5.72% of what you would have had.
Impermanent Loss by Price Change
The IL Curve: Know Your Risk at Every Price Level
Impermanent loss follows a predictable mathematical curve. Here is your quick reference:
| Price Change | Price Ratio | Impermanent Loss |
|---|---|---|
| No change | 1.00x | 0.00% |
| 1.25x increase | 1.25x | 0.62% |
| 1.50x increase | 1.50x | 2.02% |
| 1.75x increase | 1.75x | 3.77% |
| 2x increase | 2.00x | 5.72% |
| 2.5x increase | 2.50x | 9.35% |
| 3x increase | 3.00x | 13.40% |
| 4x increase | 4.00x | 20.00% |
| 5x increase | 5.00x | 25.46% |
| 10x increase | 10.00x | 42.50% |
Key Insights:
- IL is symmetric: A 2x increase and a 0.5x decrease (halving) cause the same 5.72% IL
- IL accelerates: The curve is not linear. Going from 2x to 3x adds 7.68% IL, but 3x to 4x adds only 6.6%
- Small moves are cheap: Under 1.5x price changes, IL is under 2%, often covered by fees
- Big moves hurt: At 5x price divergence, you lose over 25% compared to holding
Practical Thresholds:
- < 2% IL (under 1.5x move): Usually safe if fees are decent
- 2-10% IL (1.5x-2.5x move): Need significant fees to offset
- > 10% IL (over 2.5x move): Probably better to just hold
Calculating Your Break-Even Fee APY
How Much APY Do You Actually Need?
To profit as an LP, your trading fees must exceed your impermanent loss. Here is how to calculate your required fee APY:
Break-Even Formula:
Required APY = (IL / Holding Period in Days) x 365
Example Calculations:
| Price Change | IL | 30-Day APY Needed | 90-Day APY Needed | 365-Day APY Needed |
|---|---|---|---|---|
| 1.5x | 2.02% | 24.6% | 8.2% | 2.02% |
| 2x | 5.72% | 69.6% | 23.2% | 5.72% |
| 3x | 13.4% | 163.1% | 54.4% | 13.4% |
| 5x | 25.5% | 310.3% | 103.4% | 25.5% |
Reality Check:
Most liquidity pools offer 5-30% APY in fees. This means:
- At 10% APY, you can sustain ~2.5% IL per year, or roughly a 1.5x price move
- At 30% APY, you can sustain ~7.5% IL per year, or roughly a 2.25x price move
- For volatile pairs with 5x moves, you would need 300%+ APY to break even
Profitable LP Strategies:
- Stablecoin pairs: Near-zero IL, 5-15% APY = pure profit
- High-volume pairs: ETH/USDC on major DEXs can sustain moderate IL
- Short timeframes: Provide liquidity during low-volatility periods
- Incentivized pools: Farm governance tokens to supplement fees
Comparing AMM Versions: v2 vs v3 IL
Uniswap v2 vs v3: Different IL Profiles
Uniswap v3 introduced concentrated liquidity, which changed the IL landscape dramatically:
Uniswap v2 (Full Range):
- Liquidity spread across all prices (0 to infinity)
- Standard IL curve as shown in this calculator
- Lower capital efficiency but predictable IL
Uniswap v3 (Concentrated Range):
- Liquidity concentrated in specific price ranges
- Higher capital efficiency (up to 4000x)
- Amplified IL within range, zero IL outside range
V3 IL Amplification:
| Range Width | Capital Efficiency | IL Multiplier |
|---|---|---|
| Full range | 1x (like v2) | 1x |
| ±50% range | ~4x | ~4x |
| ±10% range | ~20x | ~20x |
| ±1% range | ~200x | ~200x |
Example: ETH/USDC in ±10% Range
If ETH price moves 10% (to the edge of your range):
- V2 IL: ~0.25%
- V3 IL (±10% range): ~5% (20x multiplied)
When to Use Each:
| Strategy | Best AMM Version |
|---|---|
| Stablecoin pairs | V3 narrow range (high efficiency, low IL) |
| Volatile pairs, passive LP | V2 or V3 full range |
| Active management | V3 concentrated (rebalance frequently) |
| Set and forget | V2 (predictable, no range management) |
V3 Risk Warning:
Many LPs set narrow V3 ranges chasing high APYs without understanding the amplified IL risk. A 20% price move that causes 1% IL in v2 can cause 20% IL in a tight v3 range.
Stablecoin Pools: Minimizing IL Risk
The Safe Haven for Liquidity Providers
Stablecoin pairs are the gold standard for low-risk LP positions because both tokens are pegged to the same value, minimizing impermanent loss.
Common Stablecoin Pairs:
| Pool | Typical APY | IL Risk | Notes |
|---|---|---|---|
| USDC/USDT | 2-8% | Near zero | Most liquid, safest |
| DAI/USDC | 3-10% | Near zero | Decentralized stables |
| FRAX/USDC | 5-15% | Very low | Algorithmic + collateralized |
| LUSD/USDC | 4-12% | Low | ETH-backed stable |
| sUSD/USDC | 3-10% | Low | Synthetix stablecoin |
Why IL Is Near-Zero:
Stablecoins aim to maintain a $1 peg. The maximum deviation is typically 1-2%:
- 1% peg deviation = 0.0025% IL
- 2% peg deviation = 0.01% IL
Even in extreme cases (USDT briefly at $0.97 in 2022), IL was under 0.1%.
Yield Sources on Stablecoin Pools:
- Trading fees: 0.01-0.05% per swap on Curve
- Protocol incentives: CRV, CVX rewards
- Lending yield: Pools like Aave add deposit yield
- Boosted rewards: Vote-locked tokens increase APY
Best Platforms for Stablecoin LPs:
| Platform | Focus | Typical APY |
|---|---|---|
| Curve Finance | Stablecoins | 3-15% |
| Convex Finance | Boosted Curve | 5-20% |
| Yearn Finance | Auto-compounded | 4-12% |
| Aave/Compound | Lending pools | 2-8% |
DeFi Yield Farming and IL Trade-offs
Balancing Rewards Against Impermanent Loss
Yield farming incentivizes liquidity provision with governance tokens, but these rewards must exceed IL to be profitable.
Typical Yield Farm Structure:
| Reward Type | Source | Sustainability |
|---|---|---|
| Trading fees | User swaps | Sustainable, volume-dependent |
| LP mining | Protocol emissions | Temporary, inflationary |
| Governance tokens | Protocol treasury | Varies by tokenomics |
| Staking rewards | Validator fees | Sustainable for PoS |
Calculating True Farm Yield:
True APY = Advertised APY - Impermanent Loss - Gas Costs
Example:
- Advertised farm APY: 100%
- Expected IL (2x move): -5.72%
- Gas costs for 10 harvests: -2%
- Token price depreciation: -30%
- Actual return: ~62% (not 100%)
High-Yield Farm Warning Signs:
- APY over 500%: Usually unsustainable token emissions
- New protocol: Higher smart contract risk
- Low TVL: Vulnerable to IL from large trades
- Anonymous team: Potential rug pull risk
Sustainable Farm Strategies:
| Strategy | Risk Level | Expected Real APY |
|---|---|---|
| Blue-chip pairs (ETH/USDC) | Low | 5-20% |
| Stablecoin pools | Very Low | 5-15% |
| Incentivized major pools | Medium | 15-50% |
| New farm, new tokens | High | -100% to +1000% |
2026 DeFi Landscape and LP Strategies
Current State of DeFi Liquidity Provision
The DeFi landscape has matured significantly, with several key developments affecting LP strategies:
Market Changes:
- Layer 2 dominance: Arbitrum, Optimism, Base have lower gas, making smaller LP positions viable
- Concentrated liquidity standard: Most DEXs now offer v3-style concentrated ranges
- Liquid staking tokens: LSTs like stETH, rETH add yield to LP positions
- Real yield focus: Protocols emphasizing sustainable fees over token emissions
Current LP Opportunities:
| Category | Example Pools | IL Risk | Expected APY |
|---|---|---|---|
| LST/ETH pairs | stETH/ETH, rETH/ETH | Very low | 3-8% |
| Stablecoin pools | USDC/USDT, DAI/FRAX | Near zero | 2-10% |
| Blue-chip volatile | ETH/USDC, BTC/USDC | Medium | 5-25% |
| Altcoin pairs | ALT/ETH | High | 20-100%+ |
Layer 2 LP Advantages:
- Gas costs 10-100x lower than Ethereum mainnet
- More frequent compounding possible
- Smaller positions economically viable
- Same IL math, lower operational overhead
Smart LP Strategies for 2026:
- LST pools: Earn staking yield + trading fees with minimal IL
- Range management: Use tools to auto-rebalance v3 positions
- Cross-chain diversification: Spread LP across multiple L2s
- Protocol-owned liquidity: Some protocols now offer bonds for LP tokens
Risk Mitigation:
- Use IL protection protocols where available
- Set alerts for price movements outside your expected range
- Diversify across multiple pools and chains
- Calculate required APY before entering any position
Pro Tips
- 💡Always calculate your break-even APY before providing liquidity. If the pool offers 20% APY but you expect a 2x price move (5.72% IL), you need to stay in the pool for at least 104 days to break even on IL alone.
- 💡Consider stablecoin pools for low-risk yield. USDC/USDT or DAI/USDC pools on Curve offer 5-15% APY with near-zero impermanent loss, making them ideal for passive income.
- 💡Use wider ranges in Uniswap v3 if you cannot actively manage positions. A ±50% range has roughly 4x the IL of a full-range position, but narrow ±5% ranges can have 100x IL amplification.
- 💡Monitor your positions during high volatility. Major market moves (Fed announcements, protocol hacks) can cause rapid price divergence and significant IL in hours.
- 💡LP in correlated asset pairs to minimize IL. ETH/stETH, BTC/WBTC, or USDC/USDT pairs have minimal price divergence because the tokens are designed to track each other.
- 💡Factor in gas costs when calculating profitability. On Ethereum mainnet, entering and exiting LP positions can cost $50-200 in gas, eating into returns on smaller positions.
- 💡Use Layer 2 networks for smaller LP positions. Arbitrum, Optimism, and Base have 10-100x lower gas costs, making $1,000-5,000 LP positions economically viable.
- 💡Set price alerts for your LP ranges. Tools like Revert Finance or DeBank can notify you when prices approach your range boundaries, allowing timely rebalancing or withdrawal.
- 💡Compound your fees regularly on high-APY pools. Daily or weekly compounding can add 5-15% to your annual returns, partially offsetting IL.
- 💡Diversify across multiple pools and protocols. Do not concentrate all liquidity in one pool. Spread across 3-5 positions to reduce protocol risk and IL concentration.
- 💡Understand that advertised APYs often exclude IL. A pool showing 100% APY might yield only 50% after accounting for expected IL on volatile pairs.
- 💡Use IL protection protocols when available. Protocols like Bancor have offered IL protection insurance, though availability and terms vary.
Frequently Asked Questions
Impermanent loss is the difference in value between holding tokens in your wallet versus providing them as liquidity in a DeFi protocol like Uniswap. When you add liquidity to an AMM pool, the protocol automatically rebalances your position as prices change, selling the appreciating token and buying the depreciating one. This means if one token moons, you end up with less of it than if you had just held. The loss is called "impermanent" because it disappears if prices return to their original ratio, but in practice, it often becomes permanent when you withdraw.
