When does impermanent loss turn into a real loss?

When the position is withdrawn while prices are different from the deposit price. Up to that point the loss is only on paper and reverses if prices return.

Do fees offset impermanent loss?

Fees are added to the LP side. If fees earned exceed the impermanent loss in dollars, the position is net positive versus holding the two tokens.

Impermanent Loss Calculator (Uniswap V3, PancakeSwap V3)

How is impermanent loss calculated?

For a 50/50 constant-product pool, impermanent loss depends only on the price ratio between when you deposited and now. Let k = sqrt(current_price / initial_price). The LP position is worth 2k / (1 + k²) times what you would have if you had simply held both tokens. Impermanent loss is that ratio minus 1 (always zero or negative). Multiply by your initial USD position to see the loss in dollars.

The number above is before fees. Fees are added back on the LP side: if your fees earned are larger than the impermanent loss in dollars, the LP position beats holding.

Uniswap V3 and PancakeSwap V3 use concentrated liquidity, so your position behaves like the 50/50 formula while the price stays inside your range. When the price leaves the range the position becomes 100% of one token and stops earning fees, so the loss relative to HODL can be larger than this calculator shows. See active vs inactive liquidity for how to spot that.

Worked example: you deposit $10,000 into an ETH/USDC pool when ETH is $3,000, and ETH drops to $2,400 (20% lower). The price ratio is 0.8, so k = sqrt(0.8) = 0.894 and the position is worth 2 × 0.894 / 1.8 = 0.9938 of holding. Impermanent loss is -0.62%, about $62 on $10,000, before fees. If the pool paid you more than $62 in fees over that time, you are ahead of simply holding.

When does impermanent loss become real?

Only when you withdraw the position while prices are different from your deposit. Until then it is unrealised and reverses if prices return. That is why it is called impermanent.