Impermanent Loss Calculator
Token Price Change
How It Works
Impermanent loss becomes permanent when you withdraw your liquidity. This calculator shows how much you'd lose if you withdrew your funds after a price change.
Important: This tool calculates loss for a simple 50/50 token pair. Real pools may have different weights and fee structures.
Token A Price Change
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Token B Price Change
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Impermanent Loss
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Result
If you had held instead of providing liquidity: $0.00
If you withdraw now: $0.00
Impermanent loss sounds like a warning you can ignore-after all, it’s called impermanent. But if you’ve ever pulled your funds out of a DeFi liquidity pool only to realize you lost money even though the price of your tokens went up, you know the truth: impermanent loss becomes permanent the moment you withdraw.
What Actually Happens in a Liquidity Pool?
When you add liquidity to a pool on Uniswap, SushiSwap, or PancakeSwap, you’re depositing two tokens in equal value-say, 1 ETH and 100 USDC-when ETH is priced at $100. The protocol uses a math formula (x * y = k) to keep the ratio of tokens balanced. As long as the price stays the same, you’re fine. But when ETH jumps to $200, something unexpected happens. Arbitrage traders notice the price difference between the pool and the open market. They buy cheap ETH from the pool and sell it on exchanges, pushing the pool’s ETH price up to match. In the process, the pool automatically adjusts its token balance. You no longer have 1 ETH and 100 USDC. You now have about 0.707 ETH and 141.4 USDC. If you’d just held your tokens instead of adding them to the pool, you’d have 1 ETH ($200) and 100 USDC ($100), worth $300 total. But your pool share is now worth about $282.80. That $17.20 gap? That’s impermanent loss. It’s called "impermanent" because if ETH drops back to $100, your pool share returns to its original value. The loss disappears. But if you withdraw when ETH is at $200, you lock in that $17.20 loss forever. That’s when impermanent loss becomes permanent.Why It’s Not Really "Impermanent" at All
The term "impermanent loss" is misleading. It’s not a temporary glitch-it’s a mathematical certainty. Every time the price of one asset in a pair moves relative to the other, the pool rebalances. The loss isn’t hidden; it’s just waiting to be realized. The only thing that makes it "impermanent" is the possibility of price reversal. According to CoinGecko’s 2023 analysis, half of all liquidity providers on Uniswap V3 end up with negative returns because their impermanent loss outweighs the trading fees they earn. That’s not rare. That’s the norm for volatile pairs. A 2022 study by Gauntlet Network found that in Uniswap V3 ETH/USDC pools with a 0.05% fee tier, 62.3% of positions lost money over six months when ETH volatility hit 80%. Even if you think you’re earning fees, the math doesn’t lie: unless the fees exceed the divergence, you’re losing money.When Does It Turn Permanent?
It’s simple: impermanent loss becomes permanent when you withdraw. There’s no gradual transition. No slow erosion. No hidden trigger. The moment you click "Withdraw," the theoretical loss turns into real, irreversible money you’ll never get back. It’s a crystallization event. Here’s how it works:- You deposit 1 ETH and 100 USDC at $100/ETH.
- ETH rises to $200. The pool rebalances. You now hold 0.707 ETH and 141.4 USDC.
- You think, "ETH went up, I’m ahead!" But your total value is $282.80. Holding would’ve been $300.
- You withdraw. The $17.20 difference is now gone forever.
Some Pools Are Worse Than Others
Not all liquidity pools are created equal. The risk of permanent loss depends heavily on the token pair and the protocol design. Stablecoin pairs like USDC/USDT or DAI/USDC have almost no impermanent loss because their prices rarely diverge. Even if one depegs by 1%, the loss is tiny-under 0.1%. These are the safest options. Volatile pairs like ETH/SOL or BTC/ADA? Dangerous. A 2x price move in one asset causes a 5.7% loss. A 3x move? 13.4%. A 5x move? 25.5%. And that’s just on Uniswap V2. With Uniswap V3’s concentrated liquidity, you can set a narrow price range to earn higher fees-but if the price moves outside that range, your entire position gets removed from the pool. You’re left holding one token, and your loss becomes permanent faster. Curve Finance’s stablecoin pools are engineered to minimize loss. But even they fail if a stablecoin breaks its peg. In May 2021, when TerraUSD (UST) started to depeg, Curve pools saw real, permanent losses-even for stablecoin pairs.Real People, Real Losses
Stories from the trenches show how easily this catches people off guard. One Reddit user, u/CryptoLiquidityLP, deposited ETH/USDC when ETH was $1,500. Three weeks later, ETH hit $2,100. He withdrew, thinking he’d made a killing. His pool share was worth $2,800. If he’d held, he’d have had $2,100 ETH + $1,500 USDC = $3,600. He lost 22% in impermanent loss, even after earning 1.2% in fees. Another case from The Defiant: a user deposited $10,000 in SOL/USDC at Solana’s peak of $260. Six months later, SOL crashed to $45. He withdrew. His $10,000 became $3,720. Trading fees? Only $180. That’s a 62.8% permanent loss. CoinGecko’s review data shows 68.4% of negative feedback from liquidity providers says: "I didn’t realize withdrawing would lock in the loss."
How to Avoid Permanent Loss
You can’t eliminate impermanent loss. But you can avoid making it permanent. Here’s what works:- Stick to stablecoin pairs-USDC/USDT, DAI/USDC. These rarely move more than 1%. Losses are negligible.
- Only provide liquidity if fees cover the risk-for volatile pairs, use pools with at least a 0.3% fee tier. Lower fees won’t save you.
- Use Uniswap V3’s concentrated liquidity-but only if you know the price range. If you think ETH will stay between $1,800 and $2,200, set your range there. If it breaks out, you’re out of the pool. That’s a trade-off.
- Withdraw when prices normalize-if ETH rises to $2,000, then drops back to $1,900, you might still be ahead. Monitor the ratio, not just the price.
- Don’t chase high APYs-if a pool offers 50% APY with a new memecoin, it’s a trap. The impermanent loss will wipe you out.
What’s Changing in 2025?
The industry knows this is a problem. New solutions are emerging. Uniswap’s upcoming Oracle-Liquidity-Bootstrapping Pools (expected late 2025) use real-time price feeds to reduce rebalancing shocks. Early tests show a 35-40% drop in permanent loss events. Balancer’s Linear Pools, launched in 2022, let you add assets with unequal weights. This reduces exposure to one token’s volatility. They’ve cut permanent loss by 62% in ETH/USDC pairs. Flashbots Research built a machine learning model that predicts price reversion with 83.7% accuracy. If you can time your withdrawal before the price swings back, you avoid permanent loss. But here’s the truth: no solution eliminates impermanent loss. Even Bancor’s "loss protection" feature, which compensates providers in BNT tokens, only offsets part of the loss. It doesn’t fix the math. The Ethereum Foundation is exploring Dynamic Automated Market Makers (DAMMs)-a new design that could eliminate impermanent loss entirely. But according to Vitalik Buterin’s September 2023 roadmap, these are still experimental. No production deployment before 2025.The Bottom Line
Impermanent loss isn’t a bug. It’s a feature of how AMMs work. And it becomes permanent the second you withdraw. If you’re new to DeFi, treat liquidity provision like a high-risk job-not passive income. You’re not just earning fees. You’re betting on price stability. And in crypto, price stability is rare. The safest path? Stick to stablecoin pairs. Withdraw only when the price ratio returns to near its starting point. And never, ever assume that because a token went up, you made money. Your loss isn’t hidden. It’s just waiting for you to pull the plug.Is impermanent loss always a loss?
No-impermanent loss is only a loss if you withdraw after the price of one asset moves significantly. If the price returns to its original ratio, the loss disappears. But if trading fees you earned over time exceed the loss, you can still come out ahead. However, this only happens in about 37.8% of Uniswap V2 positions, according to Chainalysis data from 2022.
Can I avoid impermanent loss entirely?
You can minimize it by providing liquidity only for highly correlated assets, like stablecoin pairs (USDC/USDT). These rarely deviate more than 1%, so impermanent loss is near zero. For volatile pairs, you can’t avoid it-you can only manage it with fee tiers, concentrated liquidity, or timing your withdrawal.
Does Uniswap V3 reduce impermanent loss?
Not exactly. Uniswap V3 lets you concentrate your liquidity within a price range, which can increase your fee earnings-but if the price moves outside that range, your position becomes inactive. When it re-enters, you may face larger impermanent loss if the price moved far. It doesn’t reduce the loss-it changes how and when you experience it.
How do I calculate my impermanent loss?
Use this formula: Impermanent Loss = (2 * √price_ratio) / (1 + price_ratio) - 1. For example, if ETH rises from $100 to $200, price_ratio = 2. Plug it in: (2 * √2) / (1 + 2) - 1 = (2 * 1.414) / 3 - 1 = 2.828 / 3 - 1 = 0.943 - 1 = -0.057. That’s a 5.7% loss. Tools like CoinGecko’s IL calculator or ILmentors.app do this automatically.
Why do people still provide liquidity if the risk is so high?
Because the fees can be huge-especially on new tokens or during high-volume periods. Some users intentionally take on risk for short-term gains, betting that fees will outweigh loss. Others use concentrated liquidity in Uniswap V3 to earn 10x the fees of V2. But most retail users don’t realize the risk until they withdraw and lose money. That’s why experts say: only provide liquidity if you understand the math.
Are there any DeFi protocols that don’t have impermanent loss?
No protocol using the constant product formula (x*y=k) avoids it. Even Curve, which uses a different formula for stablecoins, still suffers loss if a stablecoin depegs. New designs like Dynamic AMMs are being researched, but none are live yet. Bancor’s loss protection compensates users partially, but it’s not a fix-it’s insurance. The root cause remains.
2 Comments
Impermanent loss isn't magic-it's math. If you don't understand the x*y=k curve, you're just gambling with your capital. Most people treat DeFi like a slot machine and wonder why they lose. The formula doesn't care how much you believe in ETH. It just rebalances. Period.
I just stick to USDC/USDT. Done. No stress. No math. No headaches. If you're spending more than 20 minutes a week checking your LP positions, you're doing it wrong.