Impermanent Loss Calculator

IL = 2 × √(P₂/P₁) / (1 + P₂/P₁) - 1

Where:

• P₁ = Initial price ratio of tokens
• P₂ = Final price ratio of tokens
• √ = Square root

Common impermanent loss scenarios:

• 1.25x price change = 0.6% loss
• 1.50x price change = 2.0% loss
• 2.00x price change = 5.7% loss
• 3.00x price change = 13.4% loss
• 4.00x price change = 20.0% loss

These percentages apply regardless of which token's price changes. A price doubling or halving (2x change) results in the same impermanent loss. The loss is also the same whether token A doubles in value or token B halves in value.

Impermanent Loss (IL) occurs when you provide liquidity to a DeFi pool and the price of your deposited assets changes compared to when you deposited them. The larger the change in price between the two assets, the bigger the impermanent loss.

The term "impermanent" comes from the fact that losses only become permanent when you withdraw your liquidity. If token prices return to their original values, the impermanent loss disappears.

For example, if you deposit equal values of ETH and USDC into a liquidity pool, and ETH doubles in price:

• Your pool must maintain a 50/50 value ratio
• To do this, the pool automatically sells some ETH for USDC
• You end up with less ETH and more USDC
• The value is less than if you had simply held the original assets

While impermanent loss is a risk, it's often offset by trading fees earned from providing liquidity. The higher the trading volume and fees, the more likely you are to profit despite impermanent loss.