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Liquidity Pools6 min read

Impermanent Loss: Three Worked Examples

Numbers make this concept click faster than definitions. Three scenarios, the same starting position, and what each one costs you.

Assume you deposit $1,000 into an XRP-paired pool: $500 of XRP and $500 of a token. Impermanent loss depends only on how far the two assets move relative to each other, not on the absolute size of your deposit, so these percentages hold at any position size.

Scenario one: the token rises 25%

Relative price change of 1.25×. Impermanent loss is about 0.62%, or roughly $6 on your $1,000. Almost any pool with regular trading covers that from fees in weeks. This is the normal case, and it is why people provide liquidity into stable, busy markets.

Scenario two: the token doubles

Relative price change of 2×. Impermanent loss is about 5.7%, or roughly $57. You still made money in dollar terms — the pool is worth more than you deposited — but you made meaningfully less than if you had held the two assets untouched. Fees have to be substantial to close that gap.

Scenario three: the token quadruples

Relative price change of 4×. Impermanent loss is about 20%. This is the case people describe as 'the pool sold my winner'. It works identically in reverse: a token that falls 75% produces the same 20% shortfall against holding, on top of the loss from the price move itself.

How to use this before you deposit

  1. 1Decide the realistic price range you expect over your holding period.
  2. 2Read the impermanent loss for the far end of that range on the pool page calculator.
  3. 3Compare it against the fee income the same page shows for your position size, using recorded volume rather than a headline APY.
  4. 4If the two are close, the trade is a bet on volume staying high — size it accordingly.

Each pool page includes an impermanent loss and slippage calculator driven by that pool's actual size and fee.

Run the numbers on a real pool →

Educational content only. Nothing in this article is financial advice. Risk ratings on CampXRP are automated estimates built from public XRP Ledger data and can be wrong or out of date — always do your own research.

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