DeFi Impermanent Loss Predictor

DeFi Impermanent Loss Predictor

Calculate potential losses from providing liquidity vs holding.

How This Tool Works

Providing liquidity to an AMM (like Uniswap) isn't risk-free. If one token skyrockets while the other stays flat, the pool sells your winner to buy the loser. This calculator quantifies exactly how much value you've "lost" compared to simply holding the tokens in your wallet.

  • Formula: 2 * sqrt(price_ratio) / (1 + price_ratio) - 1
  • The Logic: AMMs force a 50/50 balance. As prices change, your pool share changes. This measures the divergence.

How to Use

  1. Enter Initial Investment: The total value you put into the pool (e.g., $1000).
  2. Set Entry Prices: The price of Token A (e.g., ETH) and Token B (e.g., USDC) when you deposited.
  3. Set Future Prices: Predict where the prices will go. What if ETH doubles?
  4. Calculate: See if the trading fees are worth the risk.

Example Scenario

You deposit $1000 into an ETH/USDC pool.
ETH price doubles (+100%).

• HODL Value: $1,500 (if you kept it in a wallet)
• Pool Value: $1,414 (excluding fees)
• Impermanent Loss: 5.72% ($86 loss)

Why This Matters

Many yield farmers chase high APYs without realizing that a 20% price move could wipe out months of rewards. This tool helps you assess if the "Juice is worth the squeeze."

Limitations & Disclaimer

This tool calculates divergence loss only.
• It does not include trading fees earned (which offset the loss).
• It assumes a standard 50/50 liquidity pool (like Uniswap V2).

FAQs

What is Impermanent Loss?

It's the difference between holding tokens in a wallet vs. providing them as liquidity. If prices diverge significantly from when you deposited, you might withdraw less value than if you had just HODLed.

Can trading fees cover the loss?

Yes. If the trading volume and fees earned are high enough, they can offset the impermanent loss. This makes providing liquidity profitable in sideways or high-volume markets.

Is stablecoin liquidity risky?

Generally, no. Since stablecoins (like USDC/USDT) are pegged to the same value, they rarely diverge, meaning impermanent loss is near zero. The risk there is smart contract risk or de-pegging.