And the fees it takes to cover it
Split 50 : 50 into the pool
One asset is 2× higher
Need 8.58% to break even
Impermanent loss
−5.7%
If you had just held
$15,000
In the pool, before fees
$14,142
In the pool, with fees
$14,442
Fees of $300 against an impermanent loss of $858 leaves you −$558 versus holding — the fees did not cover it.
The pool has to turn over 0.95× your liquidity every day for 30 days just to offset a 2× price move at the 0.3% tier. Advertised APRs are quoting the fee side of this equation only — whether they hold depends entirely on volume that has not happened yet.
Note the symmetry: a halving and a doubling cost exactly the same.
| Price move | 50 : 50 pool | 80 : 20 pool | Fees needed |
|---|---|---|---|
| 0.25× | −20.0% | −17.5% | 12.50% |
| 0.5× | −5.7% | −4.3% | 4.29% |
| 0.75× | −1.0% | −0.70% | 0.90% |
| 1×no change | 0% | 0% | 0.00% |
| 1.25× | −0.62% | −0.38% | 0.70% |
| 1.5× | −2.0% | −1.2% | 2.53% |
| 2× | −5.7% | −3.3% | 8.58% |
| 3× | −13.4% | −7.4% | 26.79% |
| 5× | −25.5% | −13.7% | 76.39% |
| 10× | −42.5% | −23.1% | 233.77% |
The figure is exact, not an approximation. For a constant-product pool the value ratio against holding is 2√r ÷ (1 + r), where r is the price of one asset relative to the other at withdrawal. It follows from the pool rebalancing continuously: as one side rises the pool sells it, so you finish with less of the winner and more of the loser than you started with.
The name is the misleading part. "Impermanent" means it reverses if prices return to where they started, not that it is small or theoretical. It becomes permanent the moment you withdraw, and most people withdraw before prices come back. The honest reading is that it is an unrealised loss with the same status as any other.
Everything here is the constant-product case, which covers Uniswap v2 and the pools built on it. Concentrated liquidity behaves differently and worse when price leaves the range you chose, since the position converts fully into the falling asset and stops earning. Token rewards, gas and any depeg or exploit risk are all excluded.
Providing liquidity to a constant-product pool means agreeing to sell whichever asset is rising and buy whichever is falling, automatically and continuously. The result is that you end up with less of the winner than you would have held. The size of that gap has an exact formula rather than an estimate: 2√r ÷ (1 + r), where r is the relative price at withdrawal.
Two features of that formula matter more than its magnitude. It is symmetric, so a halving and a doubling cost identically, and it is negative for every value of r except exactly one. Being right about which way the pair moves does not help — the pool charges you for the move either way, and only fee income can offset it.
That is why an advertised yield means little on its own. The fee side of the ledger depends on trading volume that has not happened yet, while the loss side depends only on where prices end up. A pool paying well during a quiet period can turn into a loss the moment the pair actually moves, which is usually the same moment the volume that justified the yield arrives.
⚠️ Not investment advice. This models a constant-product pool only, and excludes token rewards, gas, concentrated-liquidity behaviour, and the risk that a pooled asset depegs or the contract is exploited. All decisions and risks are your own.
It is the gap between holding two assets and putting them in a constant-product liquidity pool. The pool rebalances continuously, selling whichever asset rises and buying whichever falls, so you finish with less of the winner. The exact formula is 2√r ÷ (1 + r), where r is the relative price at withdrawal.
Exactly 5.72%, and a 4x move costs exactly 20%. Those are smaller than most people expect. The difficulty is not the size but that the number is negative for every price except no change at all.
Only in the sense that it reverses if prices return to where they started. It becomes permanent the moment you withdraw, and most withdrawals happen before prices come back. Treat it as an unrealised loss with the same status as any other.
No, and this is the part that surprises people. The formula is symmetric — a halving and a doubling cost identically — so the pool charges you for the move regardless of which way it goes. Only fee income offsets it.
The calculator gives the exact figure for your price move, and also converts it into the daily trading volume the pool must do relative to your liquidity. That second number is the honest test of an advertised APR, because the fee side depends on volume that has not happened yet.
Yes, substantially. Skewing the weights reduces how much the pool rebalances, so an 80/20 pool loses far less than a 50/50 pool on the same price move. It does not remove the loss, and the position is more exposed to the heavier asset.
No. These figures are for constant-product pools such as Uniswap v2. Concentrated liquidity behaves differently and worse once price leaves your chosen range, because the position converts fully into the falling asset and stops earning fees.