Knowla / Learn / Pools guide / Lesson 3
Lesson 3 of 7
Impermanent loss
What happens to your value when the two tokens in a pool move apart, with numbers.
A standard pool keeps its two tokens in balance as the price moves. When one token rises, traders buy it out of the pool, so you end up holding less of the one that rose and more of the one that fell. Your position finishes worth less than if you had simply held both tokens. That gap is impermanent loss, called impermanent because it shrinks if the price returns to where it started.
loss = 2 × √r ÷ (1 + r) − 1, where r is how much one token has moved against the other since you deposited
What it comes to
- One token doubles against the other (r = 2): about 5.7% less than holding.
- It quadruples (r = 4): about 20% less.
- It becomes five times as valuable (r = 5): about 25.5% less.
What the formula leaves out
It covers price divergence only. Fees you earn push the other way, which is how a busy pool can still finish ahead of holding. Concentrated-liquidity positions magnify both the fees and the loss inside the range you pick. A pair of two stable assets, or two assets that track each other, barely diverges, so the loss is small.
How Knowla shows it
The IL column is a flag that comes from the data provider, not a figure Knowla works out for your position. Knowla shows High when the flag says yes, and reads the pool more cautiously because of it. It cannot know your range, your entry price, or how long you will stay.
See it on the data.
Open the Pools table