Impermanent Loss Calculator — The Hidden Cost of DeFi Liquidity Provision
Calculate impermanent loss for any token pair in a DeFi liquidity pool. Understand how price divergence affects your position vs simply holding.
Providing liquidity in DeFi seems simple — deposit tokens, earn trading fees. But when token prices diverge significantly, you end up with less total value than if you'd just held those tokens in your wallet. That "loss" is called impermanent loss (IL), and it catches many new DeFi participants off guard. The CalcHub Impermanent Loss Calculator shows you exactly how much IL you'd have at any given price change.
How Impermanent Loss Works
In a standard AMM (Automated Market Maker) liquidity pool like Uniswap v2, liquidity is provided in a 50/50 ratio. The pool automatically rebalances to maintain this ratio as prices change — selling the token that goes up, buying the token that goes down. This means you always have less of the outperformer and more of the underperformer compared to simply holding.
The IL Formula
IL % = 2 × √(Price Ratio) / (1 + Price Ratio) − 1Where Price Ratio = new price / initial price of one token relative to the other.
Impermanent Loss Table
| Price Change of Token A | IL vs Holding |
|---|---|
| No change (1×) | 0% |
| 1.25× (up 25%) | −0.6% |
| 1.5× (up 50%) | −2.0% |
| 2× (doubles) | −5.7% |
| 3× (triples) | −13.4% |
| 5× | −25.5% |
| 10× | −42.5% |
How to Use the Calculator
- Enter the initial price ratio of the two tokens when you deposited
- Enter the current price ratio of the two tokens
- Enter the amount deposited (total USD/INR value)
- See: IL amount, LP position value, hold value, and net loss from providing liquidity
A Real Example: ETH/USDC Pool
You deposit $5,000 worth of ETH/USDC (50/50 split): $2,500 ETH + $2,500 USDC.
At deposit: ETH = $2,500
ETH doubles to $5,000:
- If you'd just held: $5,000 ETH + $2,500 USDC = $7,500
- LP position value: approximately $7,071 (due to rebalancing)
- Impermanent loss: $429 (5.7%)
Your LP position is still up (from $5,000 to $7,071 = +41.4%), but you would have done better just holding (+50%). The difference is impermanent loss.
When IL Is Worth It
IL is "impermanent" because if prices return to the initial ratio, the loss disappears. The trade-off is always:
Net return = Trading fees earned − Impermanent lossFor the position to be profitable vs holding:
- High-volume pools with significant fee income (0.3% on every swap) can offset significant IL
- Stablecoin pairs (USDC/USDT, DAI/USDC) have near-zero IL since prices don't diverge
- Correlated asset pairs (stETH/ETH, BTC/WBTC) have very low IL
The worst case: providing liquidity in a pair where one token drops 90%+ vs the other (common in new/speculative token pairs). IL in that scenario can wipe out the majority of your position.
Is impermanent loss really "impermanent"?
In theory, yes — if prices return to their original ratio, IL reverts to zero. In practice, most people remove liquidity before this happens, locking in the loss. And for tokens that experience permanent large moves (one token goes to near-zero), the loss is effectively permanent. The name is somewhat misleading; think of it as "divergence loss" instead.
Do concentrated liquidity pools (Uniswap v3) have more or less IL?
More — potentially much more. Uniswap v3 lets you concentrate your liquidity in a narrow price range for higher fee earnings. But if the price moves outside your range, you're fully out of range, earning zero fees, and holding 100% of the worse-performing token. The IL in v3 can be 3–5× worse than v2 at equivalent price moves, balanced against significantly higher fee earnings when in range.
What types of pools have the lowest impermanent loss?
Stablecoin-to-stablecoin pools (Curve Finance style) have near-zero IL because prices are pegged. Liquid staking token pools (stETH/ETH) have very low IL because the tokens track each other closely. Correlated asset pools generally have less IL than uncorrelated volatile pairs.