Impermanent Loss Monitoring¶
Track and understand impermanent loss (IL) across all your LP positions.
What is Impermanent Loss?¶
Impermanent loss occurs when the price ratio of tokens in a liquidity pool changes compared to when you deposited them. You would have been better off holding the tokens instead of providing liquidity.
How We Calculate IL¶
Where: - Current Value = Your LP position value now - Hold Value = Value if you had just held the tokens
Example¶
You deposit $1000 worth of ETH/USDC (50/50): - Initial: 0.5 ETH @ $2000 + 1000 USDC
ETH price doubles to $4000: - If you held: 0.5 ETH @ $4000 + 1000 USDC = $3000 - As LP: ~0.35 ETH @ $4000 + ~1400 USDC = $2800 - IL: ($2800 - $3000) / $3000 = -6.7%
IL Tracking Features¶
Real-Time Monitoring¶
- Current IL percentage
- IL in USD
- Historical IL charts
- IL trends
Alerts¶
- IL threshold warnings
- Significant IL changes
- Critical IL levels
- Email notifications
Analysis¶
- IL vs fees earned
- Net P&L (fees - IL)
- Break-even analysis
- APR including IL
Understanding IL Metrics¶
Negative IL¶
- You're losing compared to holding
- Common in volatile markets
- May be offset by fees
Positive IL¶
- You're gaining vs holding
- Rare but possible
- Usually in stable pairs
IL + Fees¶
- Net result of LP position
- Fees can offset IL
- Important for profitability
IL Mitigation¶
Strategies¶
- Choose stable pairs
- Narrow price ranges (Uniswap V3)
- Monitor regularly
- Exit when IL is high
When to Exit¶
- IL exceeds fee earnings
- Market becoming too volatile
- Better opportunities elsewhere
- Risk tolerance exceeded