Impermanent Loss Calculator
A 4× divergence costs 20%, whichever way it moved.
Work out Impermanent Loss. A 4× divergence costs 20%, whichever way it moved. Names the misconception directly.
Impermanent loss
20%
At a 4× price divergence · fees do not cover it
Impermanent loss is the gap between holding two tokens and pooling them. The formula is 2√r/(1+r) − 1 where r is the ratio of their price changes, and it is always a loss — the function has its maximum at zero divergence. It is symmetric, which surprises people. A token doubling and a token halving both cost 5.7%; a 4× divergence costs 20% and a 10× costs 42%, regardless of which direction it moved. "Impermanent" means it only crystallises on withdrawal — if the prices return to their original ratio, the loss disappears. Fees earned offset it, which is the entire business case for providing liquidity, and the break-even figure above is what those fees have to clear.
How the Impermanent Loss Calculator works
Impermanent loss for a 50/50 pool against simply holding, with the fees needed to break even. The formula is symmetric — a token doubling and a token halving both cost 5.7%.
Also known as: how much impermanent loss · liquidity pool versus holding · do fees cover impermanent loss · il at 2x price change
Not financial advice. This calculator is for planning and illustration, not financial advice. Real products carry fees, taxes, and terms it does not model. Confirm figures with your lender or a qualified adviser before committing.
Frequently asked questions
What is impermanent loss?
The gap between holding two tokens and pooling them. It arises because an automated market maker rebalances the pool as prices move, leaving you with more of the token that fell.
How much does it cost?
2√r/(1+r) − 1 where r is the price ratio. A 2× divergence costs 5.7%, a 4× costs 20%, and a 10× costs 42% — and it is always a loss, never a gain.
Why is it called impermanent?
Because it only crystallises on withdrawal. If the prices return to their original ratio the loss disappears entirely, which is what distinguishes it from a realised loss.
Do fees make up for it?
That is the entire business case for providing liquidity. Whether they do depends on trading volume against price volatility, and the break-even figure above is what the fees have to clear.
How do I avoid it?
Pair correlated assets, or stablecoin pairs where divergence is minimal. Concentrated liquidity positions reduce it within a range and increase it sharply outside one.
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