The constant product formula
A 50/50 pool holds two assets so that their product stays constant. When one asset's price rises, arbitrageurs buy it from the pool until the pool's ratio matches the market, which leaves the pool holding less of the asset that went up and more of the one that didn't. The loss relative to holding depends only on the ratio of the new price to the old, and it's symmetric: a halving costs the same as a doubling. Doubling costs about 5.7%, tripling about 13.4%, a fivefold move about 25.5%.
Concentrated liquidity makes it worse
Uniswap v3 and its descendants let you provide liquidity only within a price range. The same capital covers more trades inside the range, so it earns more fees, but it also rebalances faster, so the impermanent loss for a given move is larger. Once the price leaves the range the position is entirely one asset and earns nothing until the price comes back. The calculator uses the exact v3 position math, so you can see how narrowing the range trades fee capture against loss. The AMM guide covers the mechanism and the Uniswap brief covers the protocol.
Fees are the other side
Liquidity providers accept impermanent loss in exchange for fees, so the useful number is the fee yield that offsets the loss over the holding period. The calculator shows the annualized fee rate you'd need, given how long you plan to stay in the pool. If the pool's realized fee APR is below that figure for the move you expect, holding beats providing. DeFi TVL trends show where that capital has been going.
Frequently Asked Questions
The guides behind this calculator
- AMMs and liquidity pools How the constant product mechanism works.
- Uniswap brief The protocol that popularized v2 and v3 pools.
- DeFi TVL Where liquidity is being deployed.
- PancakeSwap brief The largest pools outside Ethereum.
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Formulas last reviewed 2026-09-25. Educational tool, not financial advice. Results depend entirely on the numbers you enter.