What Is an Impermanent Loss Calculator?
An impermanent loss (IL) calculator measures the difference in value between holding tokens in a liquidity pool versus simply holding them in a wallet. When you provide liquidity to an AMM (Automated Market Maker) pool, price divergence between the two tokens causes a loss relative to just holding. This tool calculates that loss for any 50/50 liquidity pool.
How to Use This Impermanent Loss Calculator
- Enter your initial investment amount in USD.
- Enter the initial and current prices for both Token A and Token B.
- Click Calculate to see the impermanent loss percentage and dollar comparison.
The Impermanent Loss Formula
For a 50/50 pool, impermanent loss is calculated as: IL = 2 * sqrt(price_ratio) / (1 + price_ratio) - 1, where price_ratio is the relative price change between the two tokens. The loss grows with the magnitude of price divergence, regardless of direction. Even a 5x price increase in one token causes approximately 25.5% impermanent loss.
IL = 2 × √(r) / (1 + r) − 1
where r = (Token A change) / (Token B change)
Frequently Asked Questions
Why is it called "impermanent" loss?
The loss is called impermanent because it only becomes permanent (realized) when you withdraw from the pool. If the token prices return to their original ratio, the impermanent loss disappears. However, in practice, this reversal rarely happens completely.
Can trading fees offset impermanent loss?
Yes. Liquidity providers earn trading fees from the pool. If the accumulated fees exceed the impermanent loss, the overall position remains profitable. High-volume pools with moderate price volatility tend to be more profitable for LPs.