Liquidity Pool Divergence Loss Calculator

About this calculator

Divergence loss, more commonly called impermanent loss, is what happens when you deposit two tokens into a 50/50 automated market maker (AMM) liquidity pool and their price ratio changes relative to when you deposited. Because the AMM's constant-product formula automatically rebalances the pool by selling the token that rises and buying the one that falls, you end up holding less of the appreciating token than if you had simply held both assets in your wallet. The standard formula expresses the loss as a function of the price ratio r: loss equals 2 times the square root of r, divided by (1 plus r), minus 1.

Liquidity providers on decentralized exchanges like Uniswap or PancakeSwap need this number to judge whether the trading fees and yield-farming rewards they earn from providing liquidity are enough to offset the divergence loss caused by price movement — a pool with two highly correlated tokens (like two stablecoins) has very low divergence loss, while a pool pairing a volatile token against a stable one can suffer heavy losses if the volatile side makes a large move.

This calculator takes your deposit value and the percentage price change of one token and returns your divergence loss in both percentage and dollar terms compared with simply holding the tokens.