What Is the Maximum Theoretical Impermanent Loss for a Given Price Change?
The impermanent loss is a function of the price change ratio. For a standard $x y = k$ pool, the loss percentage can be calculated based on the price ratio change.
If the price of one token increases by $X$ relative to the other, the loss is $2 sqrt{X} / (1 + X) – 1$. For example, a 2x price increase results in a 5.7% loss, and a 5x increase is a 20% loss.
Theoretically, as the price ratio approaches infinity (one token's price approaches zero), the impermanent loss approaches 100%, as the LP is left with an infinitely small amount of the appreciating asset.
