How to Calculate Impermanent Loss Before Providing Liquidity
Model liquidity positions with explicit assumptions. Calculate impermanent loss, estimate fee earnings, and compare LP returns vs holding.
Understanding impermanent loss
When you provide liquidity to a trading pool, the pool rebalances your assets as prices change. If you withdraw when prices have diverged from your entry point, you may have fewer assets than if you'd simply held them—this is impermanent loss.
The loss is 'impermanent' because it reverses if prices return to your entry point. But if you withdraw at diverged prices, or if prices never return, the loss becomes permanent. Understanding this tradeoff is essential before committing capital to LP positions.
What the calculator models
Input your position parameters: token pair, initial amounts, entry price, expected future price, pool fee tier, holding period, and estimated daily volume. The calculator shows: impermanent loss percentage, estimated fee earnings, LP value vs holding, and a recommendation on which strategy wins.
Results include sensitivity analysis showing how IL changes at different price points, so you can understand the range of outcomes rather than betting on a single prediction.
Pool types supported
The calculator supports constant product pools (x*y=k, like Raydium), concentrated liquidity (where you specify a price range), and stable pools (optimized for like-kind assets). Each type has different IL characteristics.
Concentrated liquidity can amplify both fees earned and impermanent loss. The calculator shows how your selected range affects outcomes compared to a full-range position.
Assumptions and limitations
All projections assume constant volume over your holding period—actual volume varies daily. Fee earnings are estimates based on your pool share and don't account for competition from other LPs. Gas costs, MEV, and rebalancing costs are not modeled.
This is a modeling tool, not financial advice. Actual returns will differ from projections. Use it to understand the mechanics and compare strategies, not to predict exact outcomes.
Related product: PTT Liquidity Lab — $9.99