Providing liquidity earns fees — but if the pooled tokens' prices move apart, the pool quietly leaves you with less than if you'd just held. Enter your deposit and how much each token's price has moved to see the real dollar gap.
Impermanent loss
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Impermanent loss
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Loss vs. holding
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Pool value now
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Value if you'd just held
Assumes a standard 50/50 constant-product pool (Uniswap v2 style) with no fee income added back in. Leave Token B's change at 0% to model the common case of pairing a volatile token against a stablecoin.
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What impermanent loss actually is
When you deposit two tokens into a constant-product liquidity pool (the model used by Uniswap v2 and most AMM forks), the pool automatically rebalances your holdings as the price between the two tokens moves — selling the token that's rising and buying the one that's falling, to keep the pool's two sides equal in value. That rebalancing is exactly why LPs earn trading fees, but it also means that whenever the two tokens' prices diverge, you end up holding less of the winner and more of the loser than if you had simply held both tokens in your wallet. The gap between "value in the pool" and "value if you'd just held" is impermanent loss.
It's called "impermanent" because if prices return to where they started, the loss disappears — but if you withdraw while prices are diverged, or fees don't cover the gap, the loss becomes permanent in practice.
The formula
For a 50/50 pool, let r be the relative price change between the two tokens since you deposited (a token that doubled against its pair has r = 2). The pool's value relative to simply holding is:
LP value ÷ HODL value = 2√r ÷ (1 + r)
This ratio is always 1 or less — by the AM-GM inequality, a pool can never beat holding, only match it (at r = 1, no price change) or fall short. A 2× price move between the tokens costs about 5.7% versus holding; a 4× move costs 20%; a 5× move costs about 25.5%. Small, everyday price divergence (a few percent) costs a small, often fee-covered amount; the outsized, memecoin-style moves are where impermanent loss really bites.
Why fees usually offset it — until they don't
Impermanent loss isn't automatically a reason to avoid liquidity providing: trading fees earned by the pool are the whole point, and in a high-volume, low-volatility pair (like two correlated stablecoins) fee income can comfortably exceed the loss. The risk shows up in volatile pairs during a strong one-directional trend, where a token can run far enough that no realistic fee yield catches up — you'd have simply been better off holding the winning token outright. Before providing liquidity, compare this calculator's loss estimate at a range of plausible price moves against the pool's actual historical fee APR, not just its headline number.
Reading the result
"Value if you'd just held" is what your deposit would be worth today if you had done nothing. "Pool value now" is what the constant-product formula actually leaves you holding, before any fee income. The dollar gap between them — not the percentage alone — is what matters for deciding whether a pool's fee yield is worth the risk.
Frequently asked questions
What is impermanent loss?
It's the gap between what your liquidity-pool deposit is worth and what the same tokens would be worth if you'd simply held them, caused by the pool automatically selling the rising token and buying the falling one as prices move apart.
Is impermanent loss a real, permanent loss?
It's only 'impermanent' if prices return to where they were when you deposited. If you withdraw while prices are still diverged, the loss is realized and permanent — unless trading fees earned along the way have made up the difference.
How much impermanent loss should I expect?
It depends only on how far the two tokens' prices move apart, not on time. A 2× relative price change costs about 5.7% versus holding; 4× costs about 20%; 5× costs about 25.5%. Stablecoin-to-stablecoin pools see minimal loss since prices barely diverge.
Do trading fees cancel out impermanent loss?
They can, especially in high-volume, low-volatility pairs. This calculator shows the loss before fee income — compare it against a pool's actual historical fee yield to judge whether providing liquidity is worth it for a given pair.
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