How to Track Impermanent Loss on Uniswap V3
In this post, you will learn how to track your Uniswap v3 impermanent loss and view in-depth analytics to make better investment decisions when entering or exiting any Uniswap v3 pools.
What is impermanent loss?
Impermanent loss is a potential loss that funds are exposed to when they are in a liquidity pool. It occurs when the mathematical formula adjusts the asset ratio in a pool to ensure they remain at 50:50 in terms of value. The pool can become uneven by large trades that drain one asset from one side of the pool, forcing a significant rebalance of the pool. The quantity of the tokens deposited into the pool changes based on the trading activity. Upon withdrawal, the user is issued the tokens equivalent to their ownership “share” of the pool. The loss is not realized until the user withdraws their funds from the liquidity pool.
What is Uniswap V3?
Uniswap v3 introduces innovative new features that work to increase capital efficiency and focus on active market makers rather than passive ones. Concentrated liquidity gives individual liquidity providers (LPs) granular control over what price ranges their capital is allocated to. Multiple fee tiers allow LPs to be appropriately compensated for taking on varying degrees of risk and to reduce trading fees for pools with high volumes. These new features have proven to be popular with traders and market makers. Studies have shown that Uniswap V3 has deeper liquidity on popular trading pairs than the large centralized exchanges like Coinbase and Binance.
What factors contribute to Uniswap V3 impermanent loss?
- Price divergence – when the price of the two assets in the pool diverge from each other, impermanent loss increases
- Extreme volatility increases the impact of impermanent loss
- Concentrated liquidity on V3 amplifies the impact of impermanent loss in tight position ranges
- Tight position ranges generate higher fees but also increase the impact of impermanent loss
- Impermanent loss can be up to 4x higher when using a liquidity range to accommodate a doubling or halving of price compared to using the entire range
Tracking your Uniswap V3 impermanent loss with APY.vision
First time APY.vision users – Enter the APY.vision app and connect your wallet by clicking the box highlighted above. On mobile/tablets click on the search icon and copy their address into the popup. Uniswap V3 is a fantastic new innovation but is very complex and requires deep analytics to be aware of everything that is happening with your position. APY.vision has key features that can surface this information.
APY.vision free dashboard for Uniswap V3
In the basic portfolio dashboard view as pictured above, you will see a basic readout of your token balances in your Uniswap V3 position. The highlighted area displays the “Liquidity Pool Gains” which is calculated using fee revenue and impermanent loss. This calculation does not include the changes in the token prices, that is reflected in the calculation labeled “Net Market Gains”.
The section highlighted above shows the underlying token balances, which can also be used to get a sense of the impermanent loss. It displays the amount of tokens that were initially deposited and compares them to the amount of tokens the user would receive if they withdrew their share of the pool at the present time. It also highlights the quantity changes and USD value of the token balances so users can quickly see what amounts of each token they are gaining or losing.
To get more extensive detailed information, click the “View details” button.
Note:The “View details” feature is locked for our Pro members!
Uniswap V3 position in depth statistics (Pro feature)
The details page will load on the “Market value” tab by default, giving a basic overview of the positions and some charts showing market performance in several different hypothetical situations.
- This chart is comparing the market value of your liquidity pool position with fees included against 3 other situations:holding both tokens in the amount you deposited them a
- holding 100% of one of the tokens in the pair, or
- 100% of the other token in the pair.
Uniswap V3 pool position fees
Clicking down to the next tab “Generated Fees” will show a chart with daily fee revenue, cumulative fee revenue, and the total amount of pending fees.
Uniswap V3 position fees APY (annualized display)
The next tab below titled “Fees APY annualized” displays a chart showing the performance of the position in APY terms to indicate hypothetical yearly performance since inception. Soon we will show prior day APY, prior 7-day APY, etc. Make sure to follow us on Twitter or Discord to get notified about future updates!
Uniswap V3 pool position ROI
The final tab shows “return on investment” and gives several hypothetical situations to compare your performance with. It compares the market value with the value if you had held the same position and not provided liquidity to the pool and computes a figure labeled “ROI vs HODL” to show the relative increase or decrease in performance. Much like the first chart, it also compares the different situations like holding 100% of either of the tokens instead of entering the pool.
Become a Pro member for enhanced tracking on your Uniswap V3 positions
All users can track the basic details of their Uniswap V3 position with our free version. Check out our Pro plan offerings to find out how you can get real-time data and other enhanced statistics about your positions!
Impermanent loss is no fun!
Providing liquidity is a great way to earn some income on tokens sitting in your wallet. You do have to be careful when providing liquidity, as sharp price increases or decreases can have a huge impact on the performance of your position. We suggest using APY.Vision to keep a close eye on your positions to know when to remove liquidity during times of extreme price volatility.
Join our Community!
If you have any questions about the new features on APY.vision, feel free to come join our Discord community and share them! Our community is super helpful and we always like to hear input from our users. If you experience and bugs or notice problems with the website, you can create a ticket via our support system. If there are features you would like to see added to the website, you can make suggestions or vote on previous suggestions here!
APY.Vision does not give investment advice and always insists that you do your own research. Read our full Legal Disclaimer.
APY.Vision is an advanced analytics tool for liquidity pool providers and yield farmers. If you’re using any DEXs, AMMs, or liquidity pools this is the tool you will need to easily track the ROI of your liquidity provider and yield farming activities. Try it now!