What is impermanent loss?
Impermanent loss is what a liquidity provider gives up compared with simply holding the tokens. Why it happens, how big it gets and how fees offset it.
Updated Nov 9, 2026
In short
When you provide liquidity to a pool of two tokens, the pool keeps rebalancing as their prices move, selling the one that rises and buying the one that falls. Impermanent loss is the difference between what your share of the pool is worth and what the same tokens would be worth if you'd just held them. It's called impermanent because it shrinks if prices return to where they were; it becomes real when you withdraw. Trading fees earned can make up for it, or not.
Why it happens
A two-token pool, such as ETH and USDC, holds both tokens and lets traders swap between them. When ETH's price rises elsewhere, traders buy the cheaper ETH from the pool until its price matches. The pool ends up with less ETH and more USDC than you put in. You still own your share of it, but you hold less of the token that went up.
How big it gets
In a standard pool where both tokens carry equal weight, the loss compared with holding depends only on how far the prices moved apart:
- A 1.25× change in one price: about 0.6%
- A 1.5× change: about 2%
- A 2× change: about 5.7%
- A 4× change: about 20%
It's the same whether the price goes up or down. Concentrated liquidity, as on Uniswap v3 and later, earns more fees while the price stays in your range, and makes impermanent loss larger when it moves; once the price leaves your range, you hold only one of the two tokens and earn nothing until it comes back or you move the range.
Fees on the other side
Every swap through the pool pays a fee to liquidity providers. Whether providing liquidity was worth it is the fees earned minus the impermanent loss, compared with simply holding.
In Burokku
The Liquidity manager shows every LP position across your wallets: whether it's in range and earning, how far the price can move before it stops, and the fees waiting to be collected, which you can collect from there. Your positions count in your net worth by what's inside them, without counting the same coin twice.
Questions
- Can impermanent loss be bigger than the fees I earn?
- Yes. If one token moves a long way and stays there, the loss can outweigh the fees, and you'd have done better holding. That's the main risk of providing liquidity to volatile pairs.
- Do stablecoin pools have impermanent loss?
- Very little, as long as both coins hold their peg, because their prices barely move apart. The risk there is one of them losing its peg.