How Much Can Impermanent Loss Cost a Liquidity Provider in a Crypto Pool?
Direct answer
Impermanent loss in numbers
Impermanent loss depends only on how far the price ratio of the two tokens moves. Uniswap's documentation gives the formula 2 × √(price ratio) ÷ (1 + price ratio) − 1 for a 50/50 constant-product pool. If one token doubles or halves against the other, the position is worth 5.7% less than simply holding the two tokens; at 3× it is 13.4% and at 4× it is 20%. Applied to Coinbase prices, a 50/50 ETH/BTC position opened at the Merge on September 15, 2022 would be about 10.7% behind holding by November 9, 2026, before fees, because ETH fell about 62% against BTC.
- Formula (Uniswap v2 docs): IL = 2√r ÷ (1 + r) − 1
- 1.5× or 0.67× move: −2.0%
- 2× or 0.5× move: −5.7%
- 4× or 0.25× move: −20.0%
- ETH/BTC since the Merge (−62%): about −10.7% vs holding, before fees
DeFi pools advertise fee yields, but the bigger number is often the one they don't show: how much worse off you are than if you had just held the two tokens. That gap is impermanent loss, and it can be calculated exactly.
What people on X are asking
In January 2026 a thread promised to explain it simply: "When you provide liquidity to a pool, you can end up with less money than if you just held your tokens". A November 2025 post warned that "DeFi yields look juicy" until impermanent loss "eats their profits", and a December 2025 explainer framed it as "the money you miss out on" versus holding, with an ETH/USDT example. The descriptions are right; here are the numbers.
What people in the thread said
- @IFEOMA_OF_WEB3 put it simply: impermanent loss is not a scam, it is maths. Correct: it follows directly from the pool's pricing formula.
- @Sheemzxx21 said stablecoin pairs are the only pools they are comfortable with. Stable pairs do cut impermanent loss, but not to zero: if one coin loses its peg, the pool sells you more of it.
These are community comments, summarised in our words; the data and sources below come first.
The fact-checked answer
The formula. Uniswap's v2 documentation derives impermanent loss in terms of the price ratio r between when you deposited and now: IL = 2 × √r ÷ (1 + r) − 1. It applies to 50/50 constant-product pools (x × y = k). Arbitrage traders rebalance the pool whenever its price differs from other markets, so the pool always ends up holding more of the token that fell and less of the one that rose.
Uniswap's own example. A provider adds 10,000 DAI and 100 ETH (ETH at $100, $20,000 total). ETH rises to $150. After arbitrage, the provider's share is about 12,240 DAI and 81.7 ETH, worth $24,500. Holding would have been worth 10,000 + 100 × $150 = $25,000. About $500 (2%) was missed, before fees. The docs note that 0.3% of all trade volume in v2 pools is paid to liquidity providers, and that "the more chop and back and forth, the better".
Impermanent loss by price-ratio move (50/50 pool, before fees)
Computed by UXS with the Uniswap v2 formula. The loss is the same for a move of r and 1/r. It only depends on the relative move between the two tokens, not on whether both rose or fell in dollars. Tap a column header to sort.
| Unchanged | 1.00 | 0% |
| +25% or −20% | 1.25 / 0.80 | −0.6% |
| +50% or −33% | 1.50 / 0.67 | −2.0% |
| −25% | 0.75 | −1.0% |
| 2× or −50% | 2.00 / 0.50 | −5.7% |
| 3× or −67% | 3.00 / 0.33 | −13.4% |
| 4× or −75% | 4.00 / 0.25 | −20.0% |
| 5× or −80% | 5.00 / 0.20 | −25.5% |
Applied to a real pair: ETH/BTC since the Merge. Using Coinbase daily prices from FRED, ETH was worth 0.0748 BTC on September 15, 2022 and 0.0283 BTC on November 9, 2026, a fall of about 62%. Plugging r = 0.379 into the formula gives a loss of about 10.7% compared with holding the same ETH and BTC. The chart shows how that gap evolved.
UXS chart
Impermanent loss of a 50/50 ETH/BTC pool opened on Sept 15, 2022 (%)
Loss vs holding ETH and BTC: latest
-10.72%
November 9, 2026
Highest in chart period
0.00%
September 15, 2022
Lowest in chart period
-20.85%
April 20, 2025
Change over 1 year
-3.51 pts
vs November 9, 2025
Year by year: Loss vs holding ETH and BTC
Computed by UXS from the same data as the chart. Tap a column header to sort. * = year to date (latest data November 9, 2026).
| 2026* | -10.72% | -3.39 pts | -6.71% | -12.67% |
| 2025 | -7.33% | -0.78 pts | -3.98% | -20.85% |
| 2024 | -6.55% | -5.22 pts | -0.59% | -8.07% |
| 2023 | -1.32% | -1.31 pts | -0.00% | -1.92% |
| 2022 | -0.01% | – | 0.00% | -0.18% |
When fees win and when they don't. Fees are earned on volume; impermanent loss grows with the size of the relative move. A pool with heavy back-and-forth trading in a range can earn more in fees than it loses. A pool where one token trends strongly against the other, as ETH did against BTC, has to earn more than 10% in fees over that period just to match holding. A pool of two closely tracking assets, such as two dollar stablecoins, has little impermanent loss unless one of them loses its peg, which is a different risk.
Why "impermanent"? If the ratio returns to where it was when you deposited, the loss disappears. Once you withdraw after a move, it is permanent.
Free PDF
Liquidity pool break-even worksheet (PDF)
Fill in before adding liquidity to a 50/50 pool.
Position
Scenarios
Checks
- Expected daily volume × fee tier × my pool share covers the break-even amount
- Smart-contract and token risk accepted separately from impermanent loss
- Exit plan if one token trends hard against the other
Fill-in fields in the PDF: Pool, fee tier, tokens and amount deposited ($); Price ratio at deposit (token A in token B); Ratio move I consider likely over my holding period (e.g. 1.5× or 0.67×); Impermanent loss at that move = 2√r ÷ (1 + r) − 1; Fee income needed to break even ($) = deposit × loss.
Download the PDF (44 KB, made by UXS, no sign-up)
Decision helper
| Pair type | Impermanent loss risk |
|---|---|
| Two stablecoins (pegs hold) | Very low |
| ETH vs a stablecoin | High: every ETH move counts |
| ETH vs BTC | Medium to high: since 2022 ETH fell 62% vs BTC |
| Small-cap token vs anything | Very high |
To understand what drives the ETH/BTC ratio, see what moves the price of Ethereum against Bitcoin; for stablecoin risks, are stablecoins safe; and for other ways to earn on ETH, how Ethereum staking works.
Common mistakes
- Comparing pool yield with zero instead of with holding.
- Ignoring that the loss depends on the ratio, not the dollar price.
- Assuming high fee APRs will continue.
- Providing liquidity to a token you would not want to hold more of after it falls.
FAQ
What is impermanent loss?
The amount a liquidity position is worth less than simply holding the two deposited tokens.
How is it calculated?
IL = 2√r ÷ (1 + r) − 1, where r is the change in the price ratio (Uniswap v2 docs).
How much do you lose if one token doubles?
About 5.7% versus holding, before fees.
Can fees cover impermanent loss?
Sometimes. It depends on trading volume, the fee tier and how far the ratio moves.
Does impermanent loss happen if both tokens rise equally?
No. If the ratio is unchanged, there is no impermanent loss.
Is impermanent loss permanent?
It becomes permanent when you withdraw after the ratio has moved.
Sources
- Uniswap Docs: Understanding returns (v2)
- FRED: Coinbase Ethereum (CBETHUSD)
- FRED: Coinbase Bitcoin (CBBTCUSD)
- ethereum.org: Decentralized finance (DeFi)
Facts checked November 10, 2026. X posts are cited as evidence of the question, not of the answer.