Impermanent Loss Calculator (AMM LP)
Estimate impermanent loss for a 50/50 constant-product pool (like Uniswap v2 style pairs).
What is impermanent loss?
Impermanent loss is the performance gap between providing liquidity in an automated market maker (AMM) pool and simply holding the same two assets in your wallet. It happens because AMM pools constantly rebalance token quantities as prices move.
If one token rises or falls sharply relative to the other, your pool position ends up with more of the underperforming asset and less of the outperforming one. The result is often a lower value than a hold-only strategy at that moment.
Impermanent loss formula
For a standard 50/50 constant-product pool, define:
- r = current price / initial price of Token A relative to Token B.
Key interpretation: this value is usually negative (or zero). The farther price moves from your entry ratio, the larger the impermanent loss.
How this calculator works
Inputs
- Initial price: Token A price when you deposited liquidity.
- Current price: Token A price now.
- Initial total deposit value: Your starting LP value (combined pair value).
- Fees earned: Optional trading fees collected, used to estimate net outcome.
Outputs
- Impermanent loss %: Relative underperformance vs HODLing.
- HODL value: Estimated value if you had held tokens instead of LPing.
- LP value (before fees): Value of pool position from AMM rebalancing alone.
- Difference vs HODL: Dollar gain/loss before fees.
- Net vs HODL (after fees): LP + fees compared to hold value.
Quick intuition with price moves
| Price ratio (r) | Scenario | Approx IL% |
|---|---|---|
| 1.00x | No price change | 0.00% |
| 1.25x | +25% | -0.62% |
| 1.50x | +50% | -2.02% |
| 2.00x | +100% | -5.72% |
| 0.50x | -50% | -5.72% |
| 4.00x | +300% | -20.00% |
Important nuance: why it is called “impermanent”
It is “impermanent” because if prices return to your original entry ratio, the loss relative to HODLing can shrink back to zero. However, once you withdraw at a changed ratio, the underperformance becomes realized.
Ways liquidity providers manage impermanent loss
- Choose pairs with lower relative volatility (for example, correlated assets).
- Prioritize pools with healthy fee volume that can offset IL.
- Use concentrated liquidity carefully and actively manage ranges.
- Track IL and fees together, not in isolation.
- Avoid overexposure to one high-volatility token when unsure of trend.
Final thought
Impermanent loss is not a bug in DeFi AMMs—it is a direct outcome of the pricing mechanism. A solid impermanent loss calculation helps you compare strategies objectively: LP income from fees versus simple holding. Use the calculator above to run scenarios before depositing capital.