Impermanent Loss Calculator
Calculate Your Impermanent Loss
Enter your initial token price ratio and current price ratio to see how much impermanent loss you'd experience. The calculator uses the constant product formula (x * y = k) used by AMM protocols.
Enter values to see your impermanent loss calculation
What Your Results Mean
IL < 5%
Typical for stablecoin pairs or small price movements. Fees often exceed loss.
IL 5-15%
Moderate risk for volatile pairs. Consider concentrated liquidity (Uniswap v3) or stablecoins.
IL > 15%
High risk. Your fees likely don't compensate for losses. Use stablecoin pools or move to higher-fee pairs with lower volatility.
Impermanent loss isn’t a glitch-it’s math. Every time you add liquidity to a DeFi pool like Uniswap or Curve, you’re signing up for a trade-off: you earn trading fees, but your portfolio value can drop simply because the price of one token moves relative to the other. It’s not about the market going down. It’s about the pool rebalancing automatically, and you ending up with more of the token that lost value. And if you withdraw before prices snap back, that loss becomes permanent.
Why Impermanent Loss Happens
At its core, impermanent loss comes from how automated market makers (AMMs) work. Most DeFi pools use the constant product formula: x * y = k. That means if you put in 1 ETH and 100 DAI (at $100 each), the pool always keeps the product of those two amounts constant. When ETH rises to $200, arbitrage traders step in and buy ETH from the pool until the ratio matches the market. You end up with less ETH and more DAI than you started with. The pool is doing its job. But your portfolio is now worth less than if you’d just held the tokens in your wallet. The math is brutal. A 2x price change? That’s a 5.7% loss. A 3x? 13.4%. A 4x? You’re down 40%. And if you’re in a volatile pair like ETH and UNI, those swings happen weekly. According to CoinTracker’s 2023 data, over 60% of new liquidity providers lose money in the first three months-not because the market crashed, but because they didn’t understand how the pool worked.Stablecoin Pools Are Your Safest Bet
If you want to avoid impermanent loss, start with stablecoins. Pairs like USDC/USDT, DAI/USDC, or USDT/DAI move less than 0.1% in normal conditions. That means your impermanent loss is near zero. You still earn fees-typically 0.01% to 0.05% per trade-and in high-volume markets, that adds up. Ston.fi’s 2024 analysis shows stablecoin LPs earn 2-5% APY with almost no IL. Compare that to ETH/UNI, where even a modest 15% price swing can cost you 15-25% in impermanent loss. Professional liquidity providers like ‘APY_Hunter’ allocate 60% of their capital to stablecoin pools. Why? Because they know fees can compound over time, and IL won’t eat their capital. During the March 2023 banking crisis, when ETH dropped 30% in 72 hours, LPs in volatile pairs lost over 20%. Those in stablecoin pools? They made money.Use Concentrated Liquidity (Uniswap v3)
Uniswap v3 changed everything. Instead of spreading your money across a wide price range (like v2), you can lock it into a narrow band-say, between $1,900 and $2,100 for ETH. That means your capital is 10x to 4,000x more efficient. You earn way more fees per dollar invested. But here’s the catch: if ETH moves outside your range, you stop earning fees. And if it drops hard, you’re stuck holding mostly ETH as its price falls. That’s when IL spikes. The key is setting ranges wisely. If ETH is trading at $2,000, a range of $1,800-$2,200 (±10%) gives you decent coverage without being too wide. Uniswap’s own data shows LPs who set ranges within 10% of the current price cut IL by half compared to v2. Most beginners set a range and forget it. That’s a mistake. Active management matters. Tools like Gamma.xyz automate range adjustments based on volatility. They move your position when the price shifts, keeping you in the fee-earning zone. Users who use these services earn 2.3x more net returns than passive v3 LPs.Choose the Right Pool Type
Not all AMMs are built the same. Curve Finance uses a “stableswap” curve designed specifically for stablecoins. It reduces impermanent loss by 80% compared to Uniswap v2. For stablecoin pairs, Curve is the clear winner. Balancer lets you create custom pools-say, 80% USDC and 20% ETH. That asymmetry reduces IL because you’re not equally exposed to both assets. Balancer Labs found this cuts IL by 30-40% for volatile pairs. DODO’s Proactive Market Maker (PMM) adjusts prices more like an order book, not a constant formula. During the 2022 crypto crash, DODO pools showed 22% less IL than Uniswap pools. It’s not perfect, but it’s better.
Don’t Chase High APYs
You see a pool offering 50% APY. Looks amazing, right? But if the tokens are volatile-like a new memecoin paired with ETH-you’re playing Russian roulette. In early 2024, a Reddit user lost 34% of their portfolio in an ETH/SHIB pool after ETH swung 40%. They didn’t realize the pool would force them to hold more SHIB as its price collapsed. High APY often means high IL risk. Tarun Chitra from Gauntlet recommends a simple rule: only provide liquidity if the fees you earn over six months exceed 1.5x your expected impermanent loss. Use tools like impermanentloss.io to simulate what happens if a token moves 2x, 3x, or 5x. If the projected loss is higher than the projected fees, walk away.Diversify Your Liquidity
Don’t put all your money in one pool. Spread it. A smart allocation might look like this:- 60% in stablecoin pairs (USDC/USDT, DAI/USDC)
- 30% in correlated volatile pairs (ETH/WETH, BTC/renBTC)
- 10% in high-risk, high-reward pools (new tokens, memecoins)
Use Tools to Manage Risk
You don’t need to be a programmer, but you do need tools.- impermanentloss.io - Enter your pair and price movement, and it shows you exact IL.
- Gamma.xyz - Automates Uniswap v3 range adjustments. Costs 0.3% monthly, but saves you from losing positions.
- SushiSwap’s IL Simulator - Built into their interface. Shows real-time IL projections as prices move.
- DeFi Education Protocol’s free calculator - Used by over 187,000 people. Great for beginners.
Future Fixes Are Coming
The DeFi world isn’t standing still. Uniswap v4 (expected late 2025) will include automatic range adjustments based on volatility. Ethereum’s ERC-7702 standard, launching in Q2 2025, will let you manage liquidity with a single transaction-cutting gas fees by 60-80%. That makes active management affordable for regular users. Gauntlet predicts IL hedging markets-like options that pay out if your pool loses value-will hit $500 million in volume by 2026. That’s still experimental, but it shows the industry is building real solutions.When Impermanent Loss Becomes Permanent
The biggest mistake? Withdrawing too early. Impermanent loss is called “impermanent” because if prices return to where they started, your loss disappears. But if you pull out before that happens-because you panicked, or because you didn’t understand the math-it becomes real. The 2022 Terra/Luna collapse is the nightmare case. UST depegged from $1. Within 72 hours, LPs in UST/ETH pools lost up to 99% of their value. That wasn’t just IL-it was protocol failure. That’s why you never put money into pools tied to unstable tokens. Stick to well-audited, liquid pairs.Final Rule: Fees Must Outpace Loss
There’s no magic bullet. Impermanent loss is baked into AMMs. But you can win anyway. The key is simple: earn more in fees than you lose to IL. Track your returns monthly. If your pool earns 8% APY and your IL is 5%, you’re ahead. If your APY is 12% but IL is 15%, you’re losing. Adjust. Switch pools. Move to stablecoins. Use automation. Rebalance. The best liquidity providers aren’t the ones who guess the market. They’re the ones who understand the math, manage risk, and let fees compound over time.Is impermanent loss avoidable in DeFi?
No, impermanent loss is unavoidable in any automated market maker (AMM) system. It’s built into the math of how liquidity pools rebalance when token prices change. The goal isn’t to eliminate it-it’s to minimize it through smart pool selection, narrow price ranges, and fee optimization.
Do stablecoin pools have impermanent loss?
Yes, but it’s extremely small-typically under 0.1% even during normal market swings. Because stablecoins like USDC and USDT are designed to stay at $1, their price ratio rarely moves. This makes them the safest option for liquidity providers who want to earn fees without risking capital erosion.
Is Uniswap v3 better than v2 for reducing impermanent loss?
Yes, but only if you actively manage your position. Uniswap v3 allows you to concentrate your liquidity in a narrow price range, which increases fee earnings and reduces IL by up to 50% compared to v2. But if you set a range and forget it, and the price moves outside it, you can lose more than you would have in v2. Active management is key.
How do I calculate my own impermanent loss?
Use a free tool like impermanentloss.io or DeFi Education Protocol’s calculator. Input your token pair, initial price, and current price. The tool will show you the exact percentage loss compared to holding. For a quick estimate: if one token doubles in price, expect roughly 5.7% IL. If it triples, expect 13.4%.
Should I use automated tools like Gamma.xyz?
If you’re using Uniswap v3 and can’t monitor your positions daily, yes. Gamma.xyz and similar services automatically adjust your liquidity range when prices shift. They cost 0.3% per month, but they prevent you from being stuck outside your range-saving you from lost fees and bigger losses. For most users, the fee is worth the protection.
What’s the safest way to start providing liquidity?
Start with a stablecoin pair like USDC/USDT on Curve Finance. Use a 10% price range on Uniswap v3 if you want higher yields. Monitor your position for a month. Learn how fees and price changes affect your holdings. Only after you understand the basics should you try volatile pairs. Never invest more than you can afford to lose.
Komal Choudhary
November 26 2025I tried putting ETH and UNI in a pool last month and lost 28% in two weeks-just because ETH went up 3x. I thought I was smart until I saw the numbers. Now I only do USDC/USDT. No drama, no tears. Just chillin’ with my 3% APY.