Impermanent Loss Calculator
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When you provide liquidity to a DeFi pool like Uniswap or Sushiswap, you’re not just earning trading fees-you’re also taking on a hidden risk called impermanent loss. It’s not a loss you see in your wallet right away. It’s the gap between what your liquidity position is worth and what you’d have had if you’d just held your tokens in your wallet. This gap opens up when the price of one token in the pair moves significantly compared to the other. And if you withdraw your funds while that gap exists, it becomes real. Understanding how to calculate it isn’t just academic-it’s the difference between making money and losing it, even when the market looks like it’s going up.
What Actually Causes Impermanent Loss?
Impermanent loss happens because of how automated market makers (AMMs) work. Most DeFi pools, like those on Uniswap v2, use a formula calledx * y = k. This means the product of the two token amounts in the pool must always stay constant. If one token’s price goes up, the protocol automatically sells some of it to buy the other token to keep the product equal. This rebalancing sounds fair, but it means you end up with fewer of the token that rose in value and more of the one that dropped.
Let’s say you put in 1 ETH and 1,600 USDC when ETH is $1,600. Your total deposit is $3,200. Now ETH rises to $2,000. The arbitrage bots jump in. They buy ETH from your pool using USDC because it’s cheaper in the pool than on the open market. Your pool now has less ETH and more USDC. When you check your position, you might see you now have 0.894 ETH and 1,788 USDC. That’s still $3,576 total. Sounds good, right?
But here’s the catch: if you’d just held your 1 ETH and 1,600 USDC, you’d now have $1,600 + $2,000 = $3,600. You’re $24 behind. That’s your impermanent loss: $24 out of $3,600, or 0.67%. It’s not a loss of your money-it’s a loss of potential gain.
The Simple Formula for 50/50 Pools
For the most common type of pool-50% token A, 50% token B-you can calculate impermanent loss with one simple formula:IL = 2 × √d / (1 + d) − 1
Where d is the price ratio change. You get d by dividing the original price of token A by its new price. If ETH went from $1,600 to $2,000, then d = 1600 / 2000 = 0.8.
Plug it in:
2 × √0.8 / (1 + 0.8) − 1 = 2 × 0.8944 / 1.8 − 1 = 1.7888 / 1.8 − 1 = 0.9938 − 1 = -0.0062
That’s -0.62%. You lost 0.62% compared to holding.
Here’s what happens at bigger moves:
- 1.25x price change → 0.6% loss
- 2x price change → 5.7% loss
- 3x price change → 13.4% loss
- 4x price change → 20.0% loss
- 5x price change → 25.5% loss
Notice how the loss grows faster than the price. That’s the power of the square root function in the formula. A 5x move doesn’t mean a 5x loss-it means a 25.5% loss. Still, that’s a big chunk of your potential upside.
What If the Pool Isn’t 50/50?
Not all pools split tokens evenly. Balancer and some custom pools use 80/20, 90/10, or even 99/1 weights. The formula changes. For a pool with weightw for token A and 1-w for token B:
IL = (2 × √(d^w × (1-w)^(1-w))) − (d^w + (1-w)^(1-w))
Let’s say you’re in an 80/20 ETH/USDC pool. ETH goes up 2x. So d = 2, w = 0.8.
First, calculate d^w = 2^0.8 = 1.741
Then (1-w)^(1-w) = 0.2^0.2 = 0.725
Now multiply: √(1.741 × 0.725) = √1.262 = 1.123
Multiply by 2: 2 × 1.123 = 2.246
Add the two parts: 1.741 + 0.725 = 2.466
Subtract: 2.246 − 2.466 = -0.22
That’s a 22% impermanent loss. That’s way higher than the 5.7% you’d get in a 50/50 pool.
Why? Because you had more of the token that rose. The AMM had to sell more of it to rebalance, and you ended up with even less of the winner than you’d have in a balanced pool. Asymmetrical pools can be riskier-even if you’re trying to reduce exposure to volatility.
Uniswap v3 and Concentrated Liquidity
Uniswap v3 changed everything. Instead of spreading your funds across the whole price range, you pick a range-say, $1,500 to $2,500 for ETH. All your liquidity works only within that range. If ETH stays inside, you earn more fees. But if it moves outside, your position stops earning and you’re fully exposed to impermanent loss.Here’s the twist: if ETH shoots to $3,000 and your range ends at $2,500, your entire position becomes 100% ETH. You’re no longer a liquidity provider-you’re just holding ETH. But you didn’t buy it at $1,600. You bought it at $2,500. That’s a 36% loss right there, before fees.
That’s why many v3 positions lose more than v2 positions. Gauntlet Network found that narrow-range v3 positions can suffer 38% more impermanent loss than equivalent v2 positions during price swings. The trade-off? Higher fees when prices stay in range. But if you pick the wrong range, you can get wiped out.
Stablecoin Pools Are Different
Curve and other stablecoin pools use a different math. Instead ofx*y=k, they use a formula that keeps prices stable even when trading volume spikes. That’s why a 10% move in USDC/DAI might cause less than 0.1% impermanent loss. The bonding curve is designed to minimize slippage and divergence.
That’s why most experienced LPs put their stablecoin funds in Curve and their volatile token funds in Uniswap v2 or v3 with wide ranges. You’re not trying to make money from price swings in stablecoins-you’re trying to earn fees without losing value.
Fees Can Offset Impermanent Loss
This is the most misunderstood part. Impermanent loss calculators don’t include fees. But real life does.Let’s say you’re in an ETH/USDC pool. ETH goes up 3x. Your impermanent loss is 13.4%. But over six months, you earned 25% in trading fees. Now you’re up 11.6%. You didn’t lose-you won.
CoinGecko’s 2023 analysis showed that only 27% of DeFi pools generate enough fees to overcome typical impermanent loss. But the top 10%-the ones with high volume and low slippage-pay out big. That’s why users on Reddit report net gains even after seeing 10%+ impermanent loss: their fees covered it.
The trick? Don’t chase pools with 100% APY. Those are usually low-volume, high-risk tokens. Look for pools with steady volume, like ETH/USDC or WBTC/USDT. Check the 30-day volume on DeFi Llama. If it’s under $10 million, the fees probably won’t save you.
How to Calculate It Yourself (Step by Step)
You don’t need a calculator. You can do it manually:- Record your initial deposit: e.g., 1 ETH and 1,600 USDC when ETH = $1,600
- Calculate your initial portfolio value: 1 × 1600 + 1600 × 1 = $3,200
- Wait for price change: ETH now = $2,000
- Use the AMM formula to find your new token amounts. If you don’t know them, use a tool like Zapper.fi or DeBank to see your position
- Calculate your current portfolio value: new ETH × $2,000 + new USDC × 1
- Calculate what you’d have if you held: 1 × 2000 + 1600 × 1 = $3,600
- Impermanent loss = (Hold value − LP value) / Hold value
Example: LP value = $3,576. Hold value = $3,600. Loss = (3600 − 3576) / 3600 = 0.67%.
Common Mistakes and How to Avoid Them
- Mistake: Thinking impermanent loss is a real loss. Fix: It’s opportunity cost. If the price goes back, it disappears. Only withdraw if you believe the trend won’t reverse.
- Mistake: Using narrow ranges in v3 without understanding the risk. Fix: Start with wide ranges (±30% from current price) until you’re confident.
- Mistake: Providing liquidity to new tokens with no volume. Fix: Stick to pairs with $50M+ daily volume. Low volume = low fees = guaranteed loss.
- Mistake: Ignoring fee compounding. Fix: Use CoinGecko’s calculator or a spreadsheet to model fees over time.
Tools to Help You
You don’t have to calculate this by hand every time:- CoinGecko Impermanent Loss Calculator - Input token, weight, price change. Gets you the theoretical loss. Doesn’t include fees.
- Zapper.fi - Shows your actual LP position and calculates impermanent loss in real time.
- DeBank - Tracks your portfolio and flags high-risk positions.
- Custom Spreadsheet - Build one with columns for price, token amounts, LP value, hold value, fees earned. Update weekly.
Final Reality Check
Impermanent loss isn’t a bug-it’s a feature of AMMs. It’s how they keep prices aligned with the market. But it’s also why most people lose money in DeFi liquidity pools.The winners? They don’t chase yield. They pick stable pairs with high volume. They use wide ranges. They hold long enough for fees to compound. They understand that if ETH triples, they’re not losing-they’re just getting paid less than if they’d held.
Ask yourself: Are you here for the fees? Or are you trying to guess the next moonshot? If it’s the latter, you’re not a liquidity provider. You’re a gambler. And in DeFi, gamblers lose.
Is impermanent loss real money I lose?
No, it’s not a loss of your deposited funds. It’s the difference between what your liquidity position is worth and what you’d have if you’d just held the tokens. If the price returns to its original level, the loss disappears. It only becomes real when you withdraw while the price is different.
Can I avoid impermanent loss entirely?
Not completely, but you can reduce it dramatically. Use stablecoin pairs (like USDC/DAI) on Curve, where impermanent loss is near zero. Avoid highly volatile token pairs unless you’re confident fees will cover it. In Uniswap v3, use wide price ranges to reduce exposure to sudden moves.
Do fees really offset impermanent loss?
Yes, often. For major pairs like ETH/USDC with high trading volume, fees can easily exceed 10-20% annually. If ETH rises 2x and your impermanent loss is 5.7%, but you earned 15% in fees, you’re still up 9.3%. Always model both loss and fees together.
Why does Uniswap v3 have higher impermanent loss?
Because you concentrate your liquidity into a narrow price range. If the price moves outside that range, your entire position becomes one token. You’re no longer hedged-you’re fully exposed. So if ETH jumps from $2,000 to $3,000 and your range ended at $2,500, you’re holding only ETH bought at $2,500, not $2,000. That’s a 20% loss before fees.
Should I use 80/20 or 90/10 pools?
Only if you’re experienced. Asymmetrical pools increase impermanent loss when the heavier token moves. An 80/20 ETH/USDC pool suffers more loss than a 50/50 pool during an ETH rally. They’re designed for specific strategies, like reducing exposure to a volatile asset, but they’re riskier for beginners.
What’s the rule of thumb for quick estimates?
For a 50/50 pool, if one token rises by x%, the impermanent loss is roughly (1 − √(1 + x/100)) × 100. So if ETH goes up 50% (x=50), loss ≈ (1 − √1.5) × 100 = (1 − 1.225) × 100 = -22.5%. That’s close to the actual 20% loss from the formula. Use it for quick mental math.
Finance
Sammy Krigs
November 1, 2025 AT 17:43so i put 1 eth and 2k usdc in a pool and eth went to 3k and i lost like 15% but my fees were 20% so i still made bank lol
naveen kumar
November 3, 2025 AT 04:00impermanent loss is just the system punishing you for trusting decentralized finance. the real loss is believing these protocols are fair. they're designed to extract value from retail users while whales front-run every price move. this formula is just a distraction from the truth: you're the liquidity and they're the predators.
Bruce Bynum
November 4, 2025 AT 10:53just stick to eth/usdc with wide ranges. keep it simple. fees add up. dont overthink it. you dont need to be a math wizard to make this work.
Edgerton Trowbridge
November 4, 2025 AT 15:52It is imperative to recognize that impermanent loss, while seemingly counterintuitive, is an inherent feature of automated market maker mechanics. The mathematical underpinnings of the constant product formula ensure price discovery, but at the cost of opportunity forgone by liquidity providers. A comprehensive analysis must account for both the magnitude of price deviation and the temporal duration of exposure, as well as the compounding effect of transaction fee accrual over time. Without this holistic perspective, risk assessment remains incomplete.
Matthew Affrunti
November 5, 2025 AT 02:04really appreciate this breakdown. i used to panic every time my lp value dipped below what i deposited, but now i just check my fees and realize i'm still ahead. stablecoin pairs are the real MVP.
mark Hayes
November 5, 2025 AT 15:33so if eth goes up 2x and you're in a 50/50 pool you lose about 5.7% but if you're in a 80/20 you lose 22%?? wow that's wild. i thought putting more in the stablecoin would protect me but turns out it makes it worse?? 🤯
Derek Hardman
November 7, 2025 AT 06:33Thank you for this thorough exposition. The distinction between theoretical impermanent loss and actual net gain through fee accumulation is frequently misunderstood. One must evaluate liquidity provision as a yield-generating activity rather than a speculative position. The data from DeFi Llama and CoinGecko corroborate the assertion that volume is the primary determinant of viability.
Phyllis Nordquist
November 8, 2025 AT 03:04It is crucial to emphasize that the formula provided for asymmetric pools is derived from the generalized constant function market maker model, wherein the weight parameters directly influence the elasticity of price response. The square root function in the 50/50 case is a special instance of a more complex power function. Misapplication of the 50/50 formula to non-uniform pools leads to significant underestimation of risk exposure. Furthermore, the inclusion of fee accrual in net return calculations remains an essential but often neglected component of risk-reward analysis.
Eric Redman
November 9, 2025 AT 09:44impermanent loss? more like permanent scam. who designed this? some grad student who never lost money? the whole system is rigged. if you're not a bot, you're the bait. they even made a calculator to make you feel smart while they take your money. lol
Jason Coe
November 9, 2025 AT 11:02man i tried a 90/10 usdc/dai pool thinking i'd be safe but when dai dipped 3% because of some bank news, my whole position got skewed and i lost like 1.8% even though the price barely moved. it's not just about big moves anymore. even tiny volatility in stablecoins can mess you up if the weights are off. i'm sticking to 50/50 from now on. the math is simpler and i can actually predict what's happening.
Brett Benton
November 10, 2025 AT 00:29as a guy who moved from crypto to farming, this hits different. you know how when you plant corn and the price of soybeans spikes, you wish you planted more soy? that's impermanent loss. you're not losing dirt, you're just not planting the right crop at the right time. fees are like rain - if it comes often enough, your corn still grows. don't chase yields, chase volume. and always, always check the 30-day stats on defi llama.
Monty Tran
November 11, 2025 AT 13:46you all are missing the point. uniswap v3 isn't designed for you. it's designed for arbitrage bots and institutional players who can afford to monitor price ranges 24/7. if you think you can outsmart the system with a wide range, you're delusional. the fee structure is engineered to extract more from retail. the math is correct but the intent is predatory. stop pretending this is finance. it's a casino with better graphics.
Beth Devine
November 12, 2025 AT 20:23i used to stress over impermanent loss until i started tracking my net position over 6 months. even with 10% loss on eth, the fees covered it and then some. just be patient. don't panic withdraw. let the math work.
Brian McElfresh
November 13, 2025 AT 04:24the government knows about this. that's why they're pushing stablecoin bills. they don't want you to realize how much you're losing in these pools. the formula is real but the real loss is your freedom. they want you to think you're earning yield when you're just funding their surveillance economy. check the blockchain - every transaction is logged. you're not anonymous. you're being tracked. and they're using your lp to manipulate prices. don't be fooled.
Hanna Kruizinga
November 15, 2025 AT 01:42i just read this and didn't even try to understand the math. i know i'm gonna lose money. why do people act like this is investing? it's gambling with extra steps.
David James
November 15, 2025 AT 19:35good info. i always thought impermanent loss was bad until i saw how much fees added up. now i only do eth/usdc and wbtc/usdt. volume matters more than anything. if the pool has less than 50m daily, i skip it.
Shaunn Graves
November 17, 2025 AT 13:14you say fees offset impermanent loss? prove it. show me the on-chain data from 1000 random lp positions over 12 months. i bet 80% lost money. this whole post is a marketing piece for uniswap. you're not helping - you're enabling.
Jessica Hulst
November 18, 2025 AT 13:56how ironic that we've built a financial system that rewards mathematical precision while punishing human intuition. we've turned liquidity into a calculus problem and called it innovation. the real question isn't how to calculate impermanent loss - it's why we've normalized sacrificing potential gain for the illusion of passive income. are we liquidity providers or digital serfs paying rent to algorithms? and who wrote the lease?
Jeremy Jaramillo
November 20, 2025 AT 01:58big thank you for laying this out clearly. i used to be scared of lp but now i see it as a long-term strategy. just pick solid pairs, keep ranges wide, and don't touch it. the fees will come. patience is the real alpha.
Masechaba Setona
November 20, 2025 AT 22:19you're all missing the deeper truth: impermanent loss is the market punishing you for not being a whale. the formula is a lie. it's designed to make you feel like you're learning, when in reality, you're just feeding the machine. true wealth isn't in liquidity pools - it's in owning the protocol. and guess who owns it? not you.
Kymberley Sant
November 22, 2025 AT 22:15impermanent loss? more like permanent dumbass loss. why do people even try this? just hodl. i did. i'm rich. you're here calculating formulas. lol