Impermanent Loss Calculator
See how much a liquidity pool position could lose against simply holding when the price moves, and whether the trading fees you earn make up for it. Runs in your browser; nothing is uploaded.
The other half of the pool is a stable coin, so half your money is in the token and half in the stable coin.
A worked example
Say you put Rs 1,00,000 into a 50/50 pool of a token and a stable coin when the token is at Rs 1,000, and the token's price doubles to Rs 2,000 while you are in the pool for 90 days at a 20% yearly fee rate. Simply holding the two halves would be worth Rs 1,50,000 by then, but the pool rebalances as the price moves, so your share is worth only about Rs 1,41,421, a loss of 5.72% against holding. Over those 90 days you also earn roughly Rs 4,932 in fees, which is not enough to close the gap, so you are left about Rs 3,647 worse off than if you had just held the two coins.
Understanding the calculation
- Price ratio
- k = new price divided by starting price.
- Held value
- Half the deposit stays in the stable coin and half moves with the token: deposit x (1 + k) / 2.
- Pool value
- In a constant-product pool it is deposit x the square root of k. Impermanent loss = pool value divided by held value, minus 1.
- Fees
- Deposit times the yield times days over 365, added to the pool value, on a simple basis.
Common questions
What is impermanent loss?
When you add two tokens to a standard 50/50 liquidity pool, the pool rebalances as the price moves, so you end up holding more of the token that fell and less of the one that rose. The gap between what your pool share is worth and what the same tokens would be worth if you simply held them is impermanent loss. It is called impermanent because it shrinks if the price returns to where it started.
What is the formula?
For a constant-product pool with price ratio change k (the new price divided by the starting price), the pool value relative to holding is 2 x the square root of k divided by (1 + k), minus 1. At k = 1 there is no loss, and at k = 2 (price doubles) it is about 5.7%.
Do trading fees make up for it?
Sometimes. Liquidity providers earn a share of trading fees, and if the fees earned are larger than the impermanent loss, the pool beat holding. Enter your expected fee yield and days to see the net result and how many days of fees cover the loss.
Does this apply to every pool?
This calculator models a classic 50/50 constant-product pool, where one side of the pair is a stable coin or a token whose price you measure against it. Concentrated liquidity pools and pools with other weights behave differently.
Is impermanent loss taxed?
It is not a taxable event by itself, since you have not sold anything. Selling, swapping or withdrawing can create taxable transfers of virtual digital assets, which are taxed at 30% on the gain with no set-off for losses. Check the treatment with a Chartered Accountant.
Why does it grow when price falls too?
The formula is symmetric in ratio terms. A price that halves gives the same percentage loss against holding as a price that doubles, about 5.7%.