Impermanent loss

I’m using the impermanent loss calculator to calculate the IL I’d have if a coins goes x%.
What I have found is that if we take an example of Token A and stable coin.
If tokens A does a 5x (500%), the IL would be roughly 25%, however what kept me thinking was if I had kept 100% of Token A would I have ‘lost’ more money?

Case: Token A: stable coin (start 1$ both)
Impermanent loss: 25.46%

If $500 of Token A and $500 of Token B were held

– Have 500.00 Token A and 500.00 Token B

– Value if held: $3,000.00

If $500 of Token A and $500 of Token B were provided as liquidity

– Have 1,118.03 Token A and 223.61 Token B (in liquidity pool)

– Value if providing liquidity: $2,236.07

So if I didn’t swap 50% of Token A to a stable coin, I would have 1000 Tokens of A and therefore should have had 5000$ right? If you take this example the ‘loss’ would be (1- (2236/5000) * 100%) ~ 55%

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1 thought on “Impermanent loss”

  1. You are correct! I keep telling people that IL is nothing to be afraid of. Especially will LP farming rewards of >100% and more!

    Usually when comparing the IL factor within an LP pair, your‘re considering to hold the exact amount of that pair (both tokens) without providing liquidity as the alternative. However I absolutely agree that this might not be a realistic case. Why would you hold that many stable coins (especially in a bullish market) if not for providing liquidity? If instead you had converted all stables to your tokens of choice and the price dumps, you‘re obviously loosing out more than you would do when providing LP.


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