Liquidity Pool Impermanent Loss Calculator
See how much a 50/50 liquidity pool underperforms simply holding the two tokens after the price of one moves — the impermanent loss every AMM LP faces.
How it works
k = new price ÷ old price · IL = 2·√k ÷ (1 + k) − 1 · Pool value = HODL value × (1 + IL)
When one token in a 50/50 pool moves in price, arbitrageurs rebalance the pool so it ends up holding more of the loser and less of the winner than if you had held both untouched. The gap between the pool value and simply holding is called impermanent loss. It depends only on the ratio of the price move, is always zero or negative, and grows symmetrically whether the price rises or falls — a 2× move and a halving both cost about 5.7%. It only becomes permanent when you withdraw; trading fees earned can offset or exceed it.
Worked example
Deposit $10,000 split 50/50. If the volatile token doubles (+100%), k = 2, so IL = 2·√2 ÷ 3 − 1 = −5.72%. Holding would be worth $15,000, but the pool is worth $14,142 — an $858 impermanent loss before fees.
Sources: Impermanent loss (Wikipedia)
Frequently asked questions
Why is it called “impermanent”?
Because the loss only exists on paper while your funds are in the pool. If the price ratio returns to where you deposited, the loss disappears entirely. It becomes real (permanent) the moment you withdraw at a different price ratio.
Do trading fees make up for impermanent loss?
Often, yes. LPs earn a cut of every swap. In a high-volume pool those fees can outweigh the impermanent loss, leaving you ahead of holding. In a low-volume pool with a big price move, the loss can dominate.
Does a price drop cause impermanent loss too?
Yes — the formula is symmetric in the price ratio. A token halving (−50%) produces the same 5.72% impermanent loss as a doubling. Only a stable price ratio avoids it.
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Educational estimate for crypto/DeFi mechanics — token prices are volatile and yields are not guaranteed. Not financial or tax advice.