Impermanent Loss Calculator

An impermanent loss calculator shows you how much value you may give up when you deposit two tokens into a liquidity pool and their prices move apart. Impermanent loss, often shortened to IL, is the gap between simply holding your two tokens in a wallet and depositing them into an automated market maker, or AMM, which is a smart contract that lets people swap tokens against a shared pool instead of an order book. The calculator above asks for two numbers only: the entry price of the volatile token when you deposited, and its current price. From those it estimates your impermanent loss as a percentage, the price ratio between now and entry, the raw price change, and a short plain-English note. This tool is for liquidity providers, meaning people who supply tokens to a pool such as Uniswap, Curve, or PancakeSwap. It is not for simple spot buying and holding, where this kind of loss does not exist.

What Impermanent Loss Is

When you provide liquidity to a standard AMM pool, you deposit two assets of equal value, for example a stablecoin worth one dollar and a volatile token such as ETH. The pool holds them under a rule called the constant product formula, written as x times y equals k, where x and y are the quantities of each token and k stays fixed. As traders swap against the pool, the smart contract keeps that product constant, which forces the pool to sell whichever token is rising and buy whichever token is falling. The result is that a liquidity provider always ends up holding more of the weaker asset and less of the stronger one compared to a person who simply kept both tokens in a wallet. That difference in final value is impermanent loss. Nobody stole anything from you. The AMM rebalanced your position automatically, and rebalancing into the losing asset is the cost of earning swap fees.

The word impermanent matters. The loss is only on paper while your funds sit in the pool. If the price of the volatile token drifts back to the exact level where you deposited, the loss disappears completely and you are left with your original deposit plus any fees. The loss becomes real, or permanent, only at the moment you withdraw at a different price. Because prices rarely return to a precise starting point, most providers do realize some IL when they exit, which is why the calculator gives you a clear estimate before you commit.

How the Calculator Works

The calculator above keeps things deliberately simple so you can reason about a position in seconds. Here is what each field means in plain English.

• Entry Price of the volatile token: the price of the changing asset at the moment you deposited into the pool. This is your reference point.
• Current Price: the price of that same token right now, or at any point you want to test.
• Impermanent Loss percent: the estimated shortfall of your pool position versus simply holding the two tokens, shown as a negative percentage.
• Price Ratio: the current price divided by the entry price, written as r. A ratio of 2 means the token doubled. A ratio of 0.5 means it halved.
• Price Change: the plain percentage move in the token, so a ratio of 2 shows as plus 100 percent.
• Note: a short readout that translates the number, for example telling you a small move causes only a tiny loss while a large move causes a serious one.

The calculator assumes a classic fifty-fifty constant product pool with two assets, which is the most common design. Concentrated liquidity pools, weighted pools, and stable-swap pools behave differently and can lose more or less than this estimate, so treat the output as a solid baseline rather than an exact figure for every venue.

How to Use It Step by Step

1. Enter the price of the volatile token at the time you deposited into the pool.
2. Enter the current price, or a hypothetical future price you want to stress test.
3. Read the Price Ratio to confirm the size of the move you are modelling.
4. Read the Impermanent Loss percent to see how far your pool position trails simply holding.
5. Compare that loss against the trading fees and reward tokens you expect to earn over the same period.
6. Write the decision and the numbers into your OneTradeJournal entry so you can check later whether fees actually covered the loss.

The Formula and the Mechanics

For a standard constant product pool the impermanent loss depends only on the price ratio r, which is the current price divided by the entry price. The formula is IL = 2 times the square root of r, divided by (1 plus r), then minus 1. The result is always zero or negative, and it is symmetric, meaning a token that doubles in price and a token that halves in price both produce the same 5.7 percent loss. This surprises many first-time providers, who assume a price rise is always good for them. In an AMM, any large move away from your entry, up or down, works against you relative to holding.

Fees are the other half of the story. Every swap that passes through the pool pays a fee, commonly 0.05 to 0.30 percent, that is shared among liquidity providers in proportion to their share of the pool. Many protocols add reward tokens on top, a practice called liquidity mining. Your true outcome is fees plus rewards minus impermanent loss. If a pool pays you enough in fees to more than cover the IL, providing liquidity can beat holding. If volume is thin and the token trends hard in one direction, the fees will not be enough and you would have been better off just holding your tokens.

Worked Examples With Real Numbers

Example 1: ETH doubles from 2000 to 4000

You deposit ETH and a stablecoin into a pool when ETH is 2000 dollars. Later ETH is 4000 dollars, so the price ratio r is 2. Plugging in, IL = 2 times the square root of 2, divided by 3, minus 1, which works out to about minus 5.7 percent. That means your pool position is worth roughly 5.7 percent less than if you had simply held the ETH and the stablecoin in your wallet. If the pool paid you 7 percent in fees over that period, you still came out ahead. If it paid only 3 percent, holding would have been the better choice.

Example 2: A token 4x from 1 to 4

You provide liquidity for a token trading at 1 dollar paired with a stablecoin. The token runs to 4 dollars, so r is 4. IL = 2 times the square root of 4, divided by 5, minus 1, which is 4 divided by 5 minus 1, or minus 20 percent. The AMM sold your token on the way up, so you captured far less of the rally than a holder did. A 20 percent gap is large, and fees on a single trending token rarely cover it. This is the classic case where liquidity providers regret not just holding.

Example 3: A token falls by half from 100 to 50

You deposit a token priced at 100 dollars against a stablecoin, and it drops to 50 dollars, so r is 0.5. IL = 2 times the square root of 0.5, divided by 1.5, minus 1, which is about minus 5.7 percent, the same figure as the 2x move. On top of the ordinary loss from the token falling, your pool position holds more of the weaker token than a simple holder would, so you are down more than a plain holder. This shows that impermanent loss stacks on top of directional losses in a downtrend, not just in a rally.

Impermanent Loss Reference Table

Practical Tips for Liquidity Providers

• Pair assets that tend to move together, such as two stablecoins or two staked versions of the same asset, to keep the price ratio near 1 and IL near zero.
• Check real trading volume and the fee tier, not just the advertised annual yield, because fees are what offset the loss.
• Treat reward tokens with caution, since their own price can fall and wipe out the yield you were counting on.
• Model a big adverse move before you deposit, using the calculator above, so you know your worst realistic case.
• Remember gas and bridging costs on entry and exit, which the IL formula does not include.
• Withdraw when the price ratio is near 1 if you want to minimise realised loss, since that is when IL is smallest.

Common Mistakes to Avoid

The most frequent error is treating a high yield number as free money. Yield and impermanent loss are two separate forces, and only their net effect tells you whether you beat holding. A second mistake is assuming a price rise is always good for a provider, when in fact any large move in either direction hurts your position relative to holding. A third is forgetting that the loss is impermanent until you withdraw, which leads some people to panic-exit at the worst moment and lock in a loss that might have recovered. A fourth is confusing liquidity provision with spot trading or perpetual futures. Impermanent loss is unique to AMM liquidity pools and does not apply when you simply buy and hold a coin, or when you trade a perpetual contract.

How This Supports Disciplined Journaling

Providing liquidity feels passive, which is exactly why it is easy to lose money slowly without noticing. Discipline means writing down your assumptions before you deposit and checking them after you withdraw. Record the entry price, the fee tier, the expected volume, and the impermanent loss you would accept in a big move. When you close the position, log the actual fees earned, the actual IL realised, and whether holding would have been better. Over ten or twenty positions a clear pattern appears, and it usually tells you which pools genuinely pay for their risk and which ones quietly cost you. Leverage and yield farming both magnify losses as much as gains, most leveraged and yield-chasing retail participants lose money over time, and this page is education, not financial advice. A calculator estimates the number. A journal tells you the truth about your results.

Use the calculator above to estimate impermanent loss before you commit tokens to any pool, then write the position into your journal so you can compare your estimate against what really happened. OneTradeJournal helps you log every liquidity position, spot trade, and perpetual with the numbers that matter, so your discipline, not your hope, decides whether you keep providing to a pool. Track it, review it, and let the record guide your next decision.