Impermanent Loss
Calculate IL on LP positions.
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Adjust the inputs on the left to see your impermanent loss.
Introduction to the Impermanent Loss Calculator
The Impermanent Loss Calculator is a free online tool that estimates the loss a DeFi liquidity provider faces compared with simply holding the two tokens. The standard formula is IL = 2 x sqrt(k) / (1 + k) - 1, where k is the price ratio change of the two tokens.
Indian DeFi users supplying liquidity to Uniswap, SushiSwap, PancakeSwap and Balancer pools rely on this LP risk tool. Whether you farm CAKE in Hyderabad, provide USDC-ETH liquidity in Mumbai or earn QUICK rewards on Polygon from Bengaluru, understanding impermanent loss is essential. Related concepts like AMM, x*y=k curve, fees APR and HODL benchmark all sit alongside IL.
Inputs are starting prices of token A and B, current prices and liquidity amount. Outputs are IL percent, dollar value of loss and a comparison between LP value and HODL value.
Note: Indian crypto income is taxed at 30 percent flat plus 1 percent TDS under section 194S.
Who Should Use This Impermanent Loss Calculator
- Crypto yield farmers in Bengaluru providing liquidity on Uniswap V2 ETH-USDC pools.
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- DeFi enthusiasts in Mumbai comparing CAKE rewards on PancakeSwap against simple HODL.
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- Polygon LP users in Hyderabad earning MATIC fees on QuickSwap stablecoin pairs.
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- Indian crypto influencers in Delhi modelling LP returns for YouTube and Twitter audiences.
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- Web3 startup founders in Pune analysing capital efficiency of concentrated liquidity positions.
Tips for Managing Impermanent Loss
Smart Impermanent Loss Tips
- Stick to stablecoin-stablecoin pools (USDC-USDT, DAI-USDC) where IL stays under 0.1 percent even with big swings.
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- Provide liquidity only when annualised fee yield is 3x your expected IL based on a 30-day chart.
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- Indian crypto gains attract 30 percent tax plus 4 percent cess; factor this before chasing Rs 10,000 LP rewards.
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- Track positions weekly using free tools like APY.vision or Revert Finance; manual tracking on a Rs 50,000+ position is risky.
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- Set a stop-loss style rule: exit the pool if IL crosses 5 percent and fees no longer compensate.
Formula Explanation
Core Impermanent Loss Formula
IL (decimal) = 2 x sqrt(k) / (1 + k) - 1 k = New Price Ratio / Old Price Ratio LP Value = 2 x sqrt(Price A x Price B) x sqrt(Initial Liquidity) HODL Value = Initial Tokens A x New Price A + Initial Tokens B x New Price B
Where:
- k = ratio of new token price to old token price
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- LP Value = current dollar worth of your liquidity pool position
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- HODL Value = dollar worth had you held both tokens instead
Example: ETH price doubles (k = 2) gives IL = 2 x 1.414 / 3 - 1 = -0.0572 or about 5.72 percent loss vs HODL.
Impermanent Loss Quick Reference Table
| Price Change | k Ratio | IL Percent | Fee APR Needed to Offset |
|---|---|---|---|
| 1.25x | 1.25 | 0.6 percent | 10-15 percent |
| 1.50x | 1.50 | 2.0 percent | 25-35 percent |
| 2.00x | 2.00 | 5.7 percent | 60-80 percent |
| 3.00x | 3.00 | 13.4 percent | 150+ percent |
| 4.00x | 4.00 | 20.0 percent | 200+ percent |
Real-World Example
Example: Karan's Uniswap V2 LP
Meet Karan, a 28 year old crypto trader from Bengaluru who deposits Rs 4,00,000 worth of ETH and USDC into a Uniswap V2 ETH-USDC pool when ETH is at Rs 2,00,000.
Step 1: Karan supplies 1 ETH (Rs 2,00,000) and 2,00,000 USDC. Three months later ETH rises to Rs 4,00,000 (k = 2). Step 2: Using IL formula: 2 x sqrt(2) / 3 - 1 = -5.72 percent. His LP value = Rs 7,54,000. Step 3: HODL value = 1 ETH at Rs 4,00,000 + 2,00,000 USDC = Rs 6,00,000. LP earned more from fees plus appreciation.
Result: Karan earned 8 percent fees (Rs 32,000) during the period. Net result: LP value Rs 7,54,000 beats HODL Rs 6,00,000 by Rs 1,54,000, but after 30 percent crypto tax his take-home is Rs 1,07,800.
Frequently Asked Questions About Impermanent Loss
Indian DeFi users often ask when impermanent loss becomes permanent, how fees offset IL and how Indian crypto tax rules apply to LP earnings. The answers below explain Uniswap V2 and V3 IL behaviour with practical tips for safer yield farming.
Frequently asked questions
How does the Impermanent Loss Calculator work?
Impermanent loss happens when providing liquidity to an AMM pool (Uniswap, PancakeSwap) and the two assets' prices move apart. The formula is IL = 2 x sqrt(p) / (1 + p) - 1, where p is the price ratio change. The calculator returns IL as a percentage of pool value, the dollar amount lost versus holding, and the breakeven fees needed.
How accurate is the impermanent loss math?
The IL formula is mathematically exact for constant-product AMMs like Uniswap V2 and similar forks. For Uniswap V3 concentrated liquidity, real IL can be 2-10x higher because positions are leveraged within a price range. The calculator handles both modes. For Curve stableswap pools, IL is much smaller (under 0.5% even with 2x price moves) because the asset prices are pegged together.
What inputs does the Impermanent Loss Calculator need?
Enter the initial deposit amount, the two assets' starting prices, and the current or projected end prices. Optionally select the AMM type (constant product V2 or concentrated V3) and the V3 price range. The calculator returns IL percentage, dollar value lost vs holding, current pool value, and the trading fees needed to break even on the position.
When is impermanent loss worth taking?
Providing liquidity makes sense when expected trading fees exceed expected IL. Stable-stable pools (USDC-USDT) have near-zero IL and earn 2-10% APY from fees. Volatile pairs (ETH-BTC, ETH-LINK) need 20-50% APY from fees to outperform just holding. The calculator computes the required fee yield for a chosen IL scenario, helping you decide before adding liquidity.
Is the Impermanent Loss Calculator free to use?
Yes, the Impermanent Loss Calculator is free on AllSmartCalculators with no signup, ads inside the form, or login. Works on any device. Bookmark it before entering any AMM liquidity pool position, when evaluating new Uniswap V3 concentrated liquidity ranges, comparing single-sided staking versus LP positions, or sizing risk on volatile-pair LP exposure.
What other crypto calculators help with DeFi?
Pair the Impermanent Loss Calculator with the Staking Rewards Calculator (for staked LP tokens), the Crypto Profit Calculator (for measuring net DeFi returns), and the Ethereum Gas Calculator (gas fees on add and remove liquidity matter for small positions). The Crypto Tax Calculator handles the tax treatment of LP-related gains and losses.
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Results from this calculator are estimates for informational use only — not financial, medical, or professional advice. Read our full disclaimer before acting on any number you see here.