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DeFi Analytics

Analyze liquidity provision risks and returns

This impermanent loss calculator translates price movements of liquidity pool token pairs into clear HODL vs. Pool Value comparisons. By entering expected trading fees, you can model the exact tipping point where yield offsets underlying impermanent loss. Monitor transaction volumes via tools like Uniswap Info to gauge dynamic fee yields.

Price divergence risk

The wider the price divergence between the two pool tokens, the greater the impermanent loss. Stablecoin pairs minimize this risk, while volatile pairs yield higher IL.

Fee yield buffer

Earning transaction fees is the core method to beat impermanent loss. High-volume pools provide a stronger buffer, but usually attract more competition.

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Asymmetric pools benefit

Using weighted pools (like Balancer 80/20) reduces IL risk on your primary holding, aligning liquidity provisioning with long-term exposure goals.

Accurately assessing impermanent loss and fee dynamics is crucial for optimizing yield farming strategies and managing capital efficiency in decentralized finance.

Frequently Asked Questions

  • Impermanent loss is the difference in value between holding tokens in a liquidity pool versus simply holding them in a wallet. It occurs because Automated Market Makers (AMMs) constantly rebalance the pool assets as their market prices diverge. The loss is "impermanent" because if prices return to their original ratio, the loss disappears.
  • Liquidity providers earn a share of trading fees from swaps in the pool. These fees accumulate and offset impermanent loss. If the fees earned exceed the impermanent loss amount, the provider makes a net profit compared to holding the assets.
  • AMM pools (like Uniswap V2) rely on the constant product formula `x * y = k`. When the price of Token A rises relative to Token B, arbitrageurs buy the cheaper Token A from the pool, leaving providers with more of the depreciated Token B and less of the appreciated Token A compared to holding them.
  • Asymmetric pools (like Balancer's 80/20 or 70/30) shift the asset ratio. An 80/20 pool significantly reduces impermanent loss for the 80% weighted asset if its price changes, making it a popular choice for long-term holders of a specific token.
  • Impermanent loss becomes permanent (realized) the moment you withdraw your liquidity from the pool. At that point, the current token balances are locked in and the paper loss becomes a real loss.
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Crypto Master

Impermanent Loss Calculator

Calculate impermanent loss and compare pool returns against HODL

Inputs

Pool Details

$
$

Token A

$
$

Token B

$
$

Results

Net PnL

$24.74

Impermanent Loss: -$25.26 | Fees Earned: +$50.00

Value Comparison

$1,250
$1,225
$1,275
HODL
Pool
Final
HODL Value
$1,250.00
Pool Value
$1,224.74
Impermanent Loss (-2.02%)
$-25.26
Fees Earned
$50.00
Final Value
$1,274.74

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