Impermanent Loss Calculator: Model LP Loss vs. HODL Returns

Why this matters

Providing liquidity to a decentralized exchange earns you a share of trading fees, but it also exposes you to impermanent loss — the difference between the value of your tokens in the pool and the value if you had simply held them. The name is somewhat misleading because the loss becomes permanent if you withdraw while the price ratio is still shifted. Understanding the magnitude of this loss relative to the fees you can earn is the core decision every liquidity provider must make before depositing capital.

The calculator models both sides of this equation: the impermanent loss from price divergence and the fee income that can offset it. A 50% price change in a standard 50/50 pool produces roughly 5.7% impermanent loss, which sounds manageable, but a 2x or 3x price change produces 20% to 30% loss that may take months of fee accumulation to recover. For concentrated liquidity positions, the loss can be even more severe if the price exits your chosen range entirely, leaving one side of your position depleted to near zero.

Impermanent loss by price change

How to use it

Enter the expected price change percentage — positive for price increases, negative for decreases (the IL is symmetric).

Select the pool fee tier: 0.05% for stable pairs, 0.30% for standard pairs, or 1.00% for exotic pairs.

Adjust the price range coverage percentage if you are using concentrated liquidity — lower coverage means higher IL risk but higher fee density.

Read the impermanent loss percentage displayed alongside the comparison of HODL value versus LP value.

Evaluate whether the projected fee income (based on pool volume and your share) would exceed the impermanent loss over your intended holding period.

Testing your result

Verify the calculator against known values: a 50% price increase in a standard 50/50 pool should produce approximately 5.72% impermanent loss. A 100% price change (doubling) should produce exactly 20% IL. Test with a negative 50% change and confirm the IL is the same as positive 50%, since impermanent loss is symmetric around the price ratio. Try the extreme case of a 500% change and confirm the result is approximately 41.42%. Check that adjusting the fee tier changes the fee income projection but not the IL percentage itself, since fees and IL are independent calculations.

Common mistakes

Confusing impermanent loss with actual loss — IL measures the opportunity cost of holding in a pool versus holding in a wallet, not a cash loss.

Assuming the loss is permanent only when you withdraw — in reality, if the price returns to its original ratio, the IL resolves to zero, but timing this is unpredictable.

Ignoring fee income when evaluating whether to provide liquidity — fees can make LP positions profitable even with significant IL.

Using concentrated liquidity with a narrow range without understanding that IL amplifies dramatically if the price exits the range.

Comparing IL across pools with different fee tiers without accounting for the fact that higher-fee pools compensate for higher volatility.

Edge cases and options

The price range coverage parameter applies specifically to concentrated liquidity positions like those on Uniswap v3. A 100% coverage represents a traditional full-range position, while lower percentages (like 10% or 20%) represent tighter ranges that earn higher fee density per unit of capital but expose you to more severe IL if the price moves outside the range. The calculator uses the standard constant-product AMM formula for IL calculation, which assumes a 50/50 value-weighted pool. For asymmetric pools or pools with dynamic weights, the actual IL may differ. The fee projection is based on the fee tier alone — actual fee income depends on pool trading volume, which is not modeled here.

Real-world use cases

Evaluating whether to provide liquidity to a new token pair by modeling the worst-case IL for expected price volatility.

Deciding between a full-range position and a concentrated liquidity range by comparing the IL profiles at different coverage levels.

Determining the break-even point where accumulated fees exceed impermanent loss for a specific pool and fee tier.

Comparing LP returns across different fee tiers (0.05%, 0.30%, 1.00%) to find the optimal risk-adjusted yield.

Stress-testing a liquidity position against historical price moves (e.g., modeling a 200% price swing) to understand downside exposure.

Frequently asked questions

Q: What is impermanent loss?

A: Impermanent loss is the difference in value between holding tokens in a liquidity pool versus holding them in a wallet. It occurs when the price ratio of the paired tokens changes — the larger the change, the greater the loss.

Q: How do fees offset impermanent loss?

A: Each swap in the pool generates fees for liquidity providers. If cumulative fee income exceeds the impermanent loss over your holding period, your LP position is net positive. The calculator shows both values so you can evaluate this trade-off.

Q: What is a typical impermanent loss?

A: A 50% price change produces roughly 5.7% IL for a standard 50/50 pool. A 2x price change produces 20% IL. Concentrated liquidity positions can have much higher IL if the price exits the chosen range.

Q: Is impermanent loss the same for price increases and decreases?

A: Yes — IL is symmetric. A 50% increase and a 50% decrease from the original price produce the same impermanent loss percentage because IL depends on the price ratio, not the direction.

Q: What fee tier should I choose for a stablecoin pair?

A: Stablecoin pairs typically use the 0.05% fee tier because price volatility between stablecoins is minimal, keeping IL very low while the tight spread still generates consistent fee income.

Q: Can impermanent loss ever be recovered?

A: If the price ratio returns to its original value, the impermanent loss resolves to zero. However, timing this recovery is unpredictable, which is why the loss is called 'impermanent' rather than 'temporary.'

Start using it now

Try the Impermanent Loss Calculator tool. See also Slippage Calculator, Token Swap Calculator, and NFT Royalty Calculator.