Notitia
Providing liquidity to a decentralised exchange pool (Uniswap, Curve) earns fees. But the pool rebalances the two tokens automatically: when one rises it sells some, when it falls it buys some. The result: you end up with less value than if you had just held the tokens.
Fees more than offset the loss here. The loss depends only on the size of the price move, not its direction: x2 and /2 both cost 5.7%.
Calculated in your browser, nothing is stored. Education, not investment advice.
That gap is called impermanent loss, because it vanishes if prices return to where they started. It becomes permanent when you withdraw.
Fees must exceed $858 for the pool to beat holding.
A x1.25 move costs 0.6%, x1.5 costs 2%, x2 costs 5.7%, x3 costs 13.4%, x5 costs 25.5%. Pools of tokens that move together (two stablecoins, ETH and stETH) suffer very little.
On Uniswap v3 you can concentrate liquidity on a price range: fees are higher, but so is impermanent loss, and the position stops earning if the price leaves the range.
It is a shortfall against holding the tokens. It becomes a realised loss when you withdraw at a different price from the deposit.
No: a x2 rise and a halving produce the same impermanent loss, 5.7%.
Pick correlated pairs, pools whose fees are high relative to volatility, and watch the net return rather than the advertised APR.