LP Position Estimator (50/50 AMM)
Estimate your token amounts, impermanent loss, trading fees, and net result for a constant-product liquidity pool (like many DEX V2 pools).
Assumes a 50/50 pool, constant volume, constant share, and no compounding/rewards.
What this liquidity pool calculator does
This tool helps you quickly evaluate whether providing liquidity to a decentralized exchange (DEX) pool may outperform simply holding your tokens. It compares two paths:
- HODL path: You hold both tokens outside the pool.
- LP path: You deposit into a 50/50 AMM pool, experience price rebalancing, and earn trading fees.
The key tradeoff in liquidity provision is simple: fee income can be attractive, but it must offset impermanent loss and smart contract risk.
How the math works
1) Initial 50/50 deposit split
In a standard 50/50 pool, your deposit is split equally by USD value into two assets. If you deposit $1,000, the model starts with $500 in Token A and $500 in Token B.
2) HODL benchmark value
The calculator first computes what your tokens would be worth now if you had not provided liquidity. This becomes your baseline.
3) Impermanent loss factor
For constant-product AMMs, relative price change between tokens affects LP value versus HODL. The model uses:
IL factor = 2 * sqrt(r) / (1 + r)
where r is the change in Token A / Token B price ratio from deposit time to now.
Impermanent loss percentage is then (IL factor - 1) * 100. It is usually zero or negative.
4) Estimated trading fees
Fee estimates are based on your approximate share of pool liquidity:
- Your share: deposit / pool TVL
- Daily fees in pool: daily volume × fee tier
- Your fees: pool daily fees × your share × days
This is a simplified estimate, but it gives a practical directional signal.
How to use this calculator effectively
Choose realistic volume assumptions
Many LP models look profitable only because volume is overstated. Use conservative average volume from recent weeks, not best-day spikes.
Stress-test price moves
Try multiple scenarios: +10%, +50%, -30%, and high-volatility swings. LP returns are path-sensitive, so one forecast is never enough.
Model shorter and longer holding periods
Fee accumulation scales with time, but so does exposure to changing volatility and market regime shifts. Compare 7, 30, and 90 days.
Quick interpretation guide
- If Net vs HODL is positive, estimated fees exceeded impermanent loss.
- If Net vs HODL is negative, holding tokens may have been better in that scenario.
- A very small pool share usually means fee income will be modest unless volume is consistently high.
- Fast one-sided token rallies often increase impermanent loss pressure.
Risks this calculator does not fully capture
- Smart contract risk and protocol exploits
- Oracle or bridge risk (for cross-chain setups)
- MEV effects and adverse execution conditions
- Dynamic pool liquidity and changing personal share over time
- Incentive token rewards, emissions, and vesting schedules
- Gas costs and tax treatment in your jurisdiction
FAQ
Is impermanent loss always “bad”?
It is best viewed as an opportunity cost versus HODL. If fee income is strong enough, your net LP outcome can still be better.
Can stablecoin pairs reduce impermanent loss?
Usually yes, because relative price changes are smaller. But smart contract, depeg, and platform risks still exist.
Should I use this as financial advice?
No. This is an educational estimator. Always verify assumptions with live on-chain data and your own risk framework.