Simplest Impermanent Loss Calculator
Input:
- Impermanent Loss: [Percentage]
Simple Impermanent Loss Calculator
Input:
- Price Change A: [Percentage]
- Price Change B: [Percentage]
- Impermanent Loss: [Result]
Advanced Impermanent Loss Calculator
Input:
- Total Invested: $0
- Liquidity Pool Value: $0 | $0
- Value After Price Changes: $0
- HODL Value: $0 | $0
Results:
- HODL Value: $0
- Value in LP: $0
- Difference: $0
How to Use This Impermanent Loss Calculator
This tool helps you quantify the opportunity cost of providing liquidity vs. holding assets. Follow these steps:
- Select Complexity Level: Start with "Simplest" (single input) or "Advanced" (detailed analysis).
- Enter Token Data: Input price changes or initial investment amounts.
- Review Results: Compare LP returns with HODLing outcomes.
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Key Insight:
Impermanent loss occurs when pooled assets diverge in value. It’s temporary until you withdraw liquidity.
Rules Governing AMMs:
- Post-price change, both assets must equalize in value.
- The product of their quantities remains constant (x × y = k).
What Is Impermanent Loss?
Impermanent loss reflects the opportunity cost of providing liquidity. While you earn trading fees, you might miss out on asset appreciation.
High-Risk Scenarios:
- One token surges/drops drastically.
- Tokens move inversely.
Mitigation Strategies:
- Pair stablecoins (minimal price fluctuation).
- Choose tokens with correlated price movements.
How Automated Market Makers (AMMs) Work
AMMs like Uniswap use algorithms (e.g., constant-product formula x × y = k) to:
- Adjust token prices dynamically based on demand.
- Distribute trading fees to liquidity providers.
Example: Buying Token A increases its price while decreasing Token B’s price.
FAQ
1. Is impermanent loss permanent?
No—it’s unrealized until you withdraw liquidity. If prices revert, the loss disappears.
2. Which token pairs have low impermanent loss?
Stablecoin pairs (e.g., USDC/USDT) or assets with pegged values.
3. Can fees offset impermanent loss?
Yes—high trading volume may compensate for unrealized losses.
4. How do I calculate impermanent loss manually?
Use the formula:
[ \text{IL} = \frac{2\sqrt{\Delta}}{1+\Delta} - 1 ]
Where Δ is the price ratio change.
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About Whiteboard Crypto
A platform simplifying crypto concepts through animations and tools. For collaborations, contact @whiteboardCryp1.
Upcoming Features:
- Real-time Uniswap/Sushiswap data integration.
- Support for non-50/50 pools.
- Reset button for calculators.