Impermanent Loss When Price Goes 5x
A 5x price change in one side of a liquidity pool leads to approximately 25% impermanent loss.
How to use this tool
- Determine the price ratio: divide the token's current price by its price when you deposited.
- Enter the price ratio (e.g. 2 if the token doubled, 0.5 if it halved).
- Read your impermanent loss percentage and how your LP position value compares to simply holding.
See the impermanent loss damage when a token in your LP rises 5x from its initial price.
Frequently asked questions
- What causes impermanent loss?
- AMM pools (like Uniswap) rebalance automatically via arbitrage. When a token's price changes, the pool sells the appreciating token and buys the depreciating one, leaving you with fewer of the winner compared to just holding.
- Is impermanent loss permanent?
- Only when you withdraw. If the price returns to your deposit price, IL disappears. Trading fees earned while providing liquidity can offset IL, depending on pool volume.
- Why is the formula symmetric for 2x and 0.5x?
- IL depends only on the magnitude of the price ratio change. A 4x increase and a 0.25x decrease (both a factor of 4) produce the same 20% impermanent loss.