Web3 Impermanent Loss & Liquidity Pool Yield Forecaster

Simulate automated market maker (AMM) risk, token price ratio shifts, and net LP returns versus simple HODLing.

⚠️ Educational estimate, not financial advice. Liquidity provisioning exposes capital to token price divergence risk, so actual pool returns may differ.

Initial LP Deposit ($)

Token Price Change vs A (%)

Trading Fee APR (%)

Staking Duration (Days)

Impermanent Loss (%)

-2.02%

Fee Rewards Earned ($)

$2,500.00

Net Strategy PnL vs HODL ($)

+$1,450.20

Explore More Smart Living Tools

Browse our directory of free, client-side web utilities and financial calculators.

View Master Tools Index

Understanding Impermanent Loss in Automated Market Makers (AMMs)

Providing liquidity to decentralized exchanges (DEXs) like Uniswap, Curve, or PancakeSwap allows crypto holders to earn passive yield from trading fees. However, when the relative price of deposited token pairs diverges significantly from your entry ratio, liquidity providers experience impermanent loss compared to simply holding the assets in an external wallet.

Our Web3 Impermanent Loss & Liquidity Pool Yield Forecaster models price divergence shifts and calculates whether trading fee APRs successfully compensate for underlying asset volatility relative to a baseline HODL strategy.

Governing Mathematical Formulas

This client-side AMM model computes divergence loss based on relative price ratio changes and accrued fee yields over time:

• Price Ratio Factor: r = 1 + (Price Change % / 100)
• Impermanent Loss Percentage: IL (%) = [(2 × √r / (1 + r)) - 1] × 100
• Fee Rewards Earned: Fees ($) = Initial Deposit × (APR / 100) × (Days / 365)
• Net Strategy Performance: Evaluates pool value plus fees versus holding baseline tokens outside the pool.

Real-world positions must also account for token transfer fees, reward token price volatility, and smart contract impermanent loss risk.

Worked Calculation Examples

Consider the default inputs loaded into this calculator:

• Initial LP Deposit: $10,000.00
• Token Price Change vs A: +50% ($r = 1.50$)
• Trading Fee APR: 25%
• Staking Duration: 365 Days

With a 50% price ratio shift, the price factor $r = 1.50$. Applying the impermanent loss formula yields an IL of approximately -2.02%. Over 365 days, a 25% APR on a $10,000 deposit generates $2,500.00 in fee rewards. Factoring in the impermanent loss against baseline holding value, the net strategy profit compared to pure HODLing equals +$1,450.20.

Frequently Asked Questions

1. Why is the loss called "impermanent"?

It is called impermanent because the divergence loss is only a paper calculation until you withdraw your liquidity from the pool. If the token prices eventually return to their original entry ratio, the impermanent loss disappears entirely.

2. How do trading fees offset impermanent loss?

Every time a user swaps tokens through a liquidity pool, they pay a small percentage trading fee (e.g., 0.3%). These fees accumulate inside the pool balances, generating passive yield that can offset moderate price divergence over longer staking timeframes.

3. What happens to my token ratio when prices diverge?

Automated market makers use constant product formulas ($x \times y = k$) to rebalance pool reserves automatically. As one token price rises relative to the other, the pool sells your winning asset and buys more of the losing asset to maintain balance.

4. Is impermanent loss worse in volatile pairs or stablecoin pairs?

Impermanent loss is significantly higher in volatile token pairs (e.g., ETH/USDT) where price ratios swing widely. Stablecoin pairs (e.g., USDC/USDT) experience minimal price divergence, resulting in negligible impermanent loss.

5. Is this calculator private and secure?

Your inputs are not sent to our servers. All calculations execute locally in your browser using JavaScript logic. The page may still load standard third-party ad services.

Last updated: October 2026