Does impermanent loss mean I always lose money?

No. Impermanent loss measures the opportunity cost compared to holding. If trading fees and rewards exceed the IL, you still profit. The calculator helps you compare the two outcomes.

Can impermanent loss exceed my initial deposit?

No. The maximum impermanent loss approaches but never reaches 100%. Even in extreme price moves, you retain some value because the AMM formula preserves the product of the two token quantities.

Is impermanent loss different on Uniswap v3?

Yes. Uniswap v3 uses concentrated liquidity, which magnifies both fee income and impermanent loss. A narrower price range means higher capital efficiency but greater IL if the price moves outside your range.

How to Calculate Impermanent Loss

5 min readCrypto

Providing liquidity to an automated market maker (AMM) earns you trading fees, but price changes can cause impermanent loss that eats into your returns. This guide explains how impermanent loss works, how to calculate it, and how to decide whether the fees you earn make liquidity provision worthwhile.

Quick Steps

1
Open the Impermanent Loss Calculator
Go to the Impermanent Loss Calculator tool on Toolin.
2
Enter initial token prices
Input the price of each token at the time of deposit.
3
Enter current or projected prices
Type current prices or model future scenarios.
4
Review impermanent loss percentage
See exactly how much value the price divergence costs you.
5
Compare IL to earned fees
Determine whether trading fees and rewards outweigh the loss.
6
Decide whether to hold or withdraw
Use the results to make an informed decision about your LP position.

Impermanent Loss Calculator

Calculate potential loss when providing liquidity to AMM pools

Open Tool

What Is Impermanent Loss?

Impermanent loss (IL) is the difference in value between holding tokens in a liquidity pool versus simply holding them in your wallet. When the price ratio of the two tokens in a pool changes, the AMM rebalances your position, leaving you with more of the cheaper token and less of the expensive one. The loss is called 'impermanent' because it reverses if prices return to their original ratio. However, if you withdraw while prices differ, the loss becomes permanent.

The Impermanent Loss Formula

IL = 2 × sqrt(price_ratio) / (1 + price_ratio) - 1

Where price_ratio = new_price / original_price

Examples:
  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
  5.00x price change → ~25.5% loss

Using the Impermanent Loss Calculator

Open the Impermanent Loss Calculator

Navigate to the Impermanent Loss Calculator on Toolin.

Enter the initial token prices

Type the price of each token at the time you deposited (or plan to deposit) liquidity.

Enter the current or projected prices

Type the current price of each token, or a hypothetical future price to model scenarios.

Review the impermanent loss

The calculator shows the percentage loss and the dollar difference between holding and providing liquidity.

Compare against earned fees

Estimate the trading fees you have earned (or expect to earn) and subtract the impermanent loss to see net profit.

Strategies to Minimize Impermanent Loss

Choose stablecoin pairs (e.g., USDC/USDT) for near-zero impermanent loss.
Provide liquidity to correlated pairs (e.g., ETH/stETH) where price ratios stay close.
Use concentrated liquidity positions carefully; they amplify both fees and IL.
Monitor price divergence and withdraw before IL exceeds accumulated fees.
Factor in liquidity mining rewards, which can offset moderate IL.

Try Impermanent Loss Calculator Now — Free, No Sign-up

Frequently Asked Questions

Does impermanent loss mean I always lose money?: No. Impermanent loss measures the opportunity cost compared to holding. If trading fees and rewards exceed the IL, you still profit. The calculator helps you compare the two outcomes.
Can impermanent loss exceed my initial deposit?: No. The maximum impermanent loss approaches but never reaches 100%. Even in extreme price moves, you retain some value because the AMM formula preserves the product of the two token quantities.
Is impermanent loss different on Uniswap v3?: Yes. Uniswap v3 uses concentrated liquidity, which magnifies both fee income and impermanent loss. A narrower price range means higher capital efficiency but greater IL if the price moves outside your range.