What is impermanent loss? The hidden cost of providing crypto liquidity
By SendPay Business · · 2 min read
- 1Type in your own numbers
- 2The tool works it out
- 3See the answer clearly
Impermanent loss is the difference between what a liquidity provider's tokens are worth in an automated market maker pool and what they'd be worth if they'd simply held them. It happens when the prices of the two tokens in the pool move apart.
Why it happens
When one token's price rises on other markets, traders buy it cheaply from the pool until the pool price catches up. The pool ends up holding less of the token that rose and more of the one that didn't, so the provider misses out on part of the gain.
A rough guide to the size
- If one token's price doubles against the other, the loss versus holding is about 5.7%.
- If it rises 4 times, the loss is about 20%.
- The bigger the price move in either direction, the bigger the loss.
Try it
Name your platform and watch it come to life
Type a name, tap a colour and pick what it does. The phone changes as you go.
Colour
What it does
Design and preview your whole platform free, then launch when you are ready.
Why 'impermanent'?
If prices return to where they were when you deposited, the loss disappears. If you withdraw while prices are apart, it becomes a real loss. Trading fees earned from the pool can make up for it, but not always.
Where SendPay fits
SendPay doesn't offer DeFi or liquidity pools. SendPay platforms let your customers buy, sell and hold crypto under your own brand, with assets held by regulated partners and a trading fee you set.
How it works
Your own money app- 1Name it and pick your colours
- 2Choose what it does
- 3Launch when you are ready
Why sign up
Create your free SendPay account
It's all about creating your own financial platform with ease. Start with a free account today.
- 🪪A free business accountOpen it in about a minute with your business name, email, password and mobile. No card and no documents to start.
- 💳Get paid from day oneTake card payments, and share your own payment link and invoices so customers pay in a click.
- 🌐A free business websiteFree to build, free to publish and free to keep, with unlimited visits.
- 🚀Your own financial platformDesign and preview your whole platform free, then launch when you are ready.
SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.
Questions people ask
How does a swap in an AMM pool get priced?
Enter the pool balances and your swap into the free calculator.
AMM swap calculator →How much would I lose in a pool?
Work out impermanent loss from price changes.
Impermanent loss calculator →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.