Impermanent Loss Calculator

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Agata Flak

Agata is an aspiring translator and interpreter with a passion for foreign languages and linguistics. She holds a Bachelor’s degree in French and Italian Studies from the University of Manchester. She spent a year studying translation and interpreting in Mons, Belgium. She is currently pursuing her Master’s degree in Translation Studies at the Jagiellonian University in Cracow, specializing in conference interpreting. In her free time, she likes petting her dog and engaging in physical training. See full profile

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Steven Wooding is a physicist by training with a degree from the University of Surrey specializing in nuclear physics. He loves data analysis and computer programming. He has worked on exciting projects such as environmentally aware radar, using genetic algorithms to tune radar, and building the UK vaccine queue calculator. Steve is now the Editorial Quality Assurance Coordinator here at Omni Calculator, making sure every calculator meets the standards our users expect. In his spare time, he enjoys cycling, photography, wildlife watching, and long walks. See full profile

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Welcome to the impermanent loss calculator, a straightforward tool designed to help you figure out the risk of providing liquidity in DeFi. If you’re wondering, “What is impermanent loss?”, you’re in the right spot!

Let’s be honest, decentralized finance can feel a bit like the Wild West. You deposit your hard-earned tokens into a liquidity pool, expecting sweet trading fees, only to realize later that the value of your underlying assets has dropped compared to just holding them in your wallet. Using a reliable impermanent loss calculator takes the guesswork out of the equation, letting you plan your moves with actual data instead of blind hope.

Ready to discover how impermanent loss works? Our balancer impermanent loss calculator is here for you!

What is impermanent loss?

At its core, this phenomenon happens when the price of your deposited tokens changes compared to when you first put them into a smart contract. The greater the price divergence, the larger the potential impermanent loss. New yield farmers constantly wonder what impermanent loss will cost them in the long run. If you aren’t paying attention, this hidden metric can easily wipe out all the trading fees you’ve collected. Understanding exactly what impermanent loss is is the first crucial step to becoming a profitable liquidity provider.

To really grasp how impermanent loss works, you have to look closely at the math powering automated market makers (AMMs). These protocols generally rely on a constant product formula (50/50 pools) to rebalance the pool as prices change. When token prices shift on external exchanges, arbitrage traders swoop in to rebalance the pool, potentially leaving you with a larger share of the underperforming token. If this sounds confusing, just think of it as a penalty for providing liquidity during volatile markets. It is essentially a specialized type of opportunity cost.

Note that impermanent loss is only converted to an actual loss if you withdraw your tokens from the pool. If prices return to the same levels they were when you entered the pool, the impermanent loss will disappear.

🙋 While you’re keeping a close eye on pool risks, you might also want to estimate your compound interest. Head over to our APY calculator to see how those farming yields stack up over months or years!

How to use the impermanent loss calculator

Navigating this tool is simple. Just follow these steps to evaluate how your crypto assets might perform inside a liquidity pool compared to just sitting in your wallet:

Select your asset weights at the top of the impermanent loss calculator — Choose the pool ratio from the dropdown menu. Select the last option to input custom weights.
Enter your initial deposit — Input the total overall value that you are depositing into the pool.
Fill in Token A details — For your first asset, enter its initial price at the time of deposit and your predicted future price. The quantity will be calculated for you.
Fill in Token B details — Repeat the same process for your second asset by entering its initial price and future price.

Once you input these values, the calculator automatically runs the math and provides a detailed breakdown in the Results section:

Impermanent loss: Remember how impermanent loss works? It’s the percentage of value lost due to the price divergence of the two assets.
Value if held (HODL): The total value of your assets if you had simply kept them in your hardware wallet without providing liquidity.
Value in pool: The current value of your combined assets while locked inside the liquidity pool.
Net loss vs. holding: The difference between simply holding your tokens versus exposing them to the automated market maker.

Tackling AMM impermanent loss

Almost anyone providing liquidity on decentralized exchanges will eventually face AMM impermanent loss. Our tool easily functions as a highly flexible balancer impermanent loss calculator, meaning it can handle different asset weights (such as 80/20 or 60/40 pools) rather than just the standard 50/50 splits. By actively measuring AMM impermanent loss before you deposit, you can decide if a pool is actually worth the risk.

Once you see how impermanent loss works in real-time through the numbers, you start making much smarter choices about where to park your crypto. If a pool’s projected annual returns (which you can quickly verify using an APR calculator) don’t significantly offset the expected impermanent loss, you are usually better off just holding the assets. Whether you need a basic check or a highly specific balancer impermanent loss calculator, crunching these numbers first is absolutely critical.

🙋 At the end of the day, you need to know if a liquidity pool actually made you money. Jump over to our ROI calculator to figure out your exact return on investment after all fees and losses.