Price scenario: amplified IL vs full-range
Range width vs capital efficiency vs risk
Same current price, same target move — only the range width changes. Tighter ranges earn more fees per dollar but amplify IL and exit range faster.
| Range | Efficiency | Amplified IL | In range at target? |
|---|
Out of range = zero fees, full directional exposure
The moment price crosses either edge of your range, your position stops earning trading fees and converts entirely into one asset. Above the upper bound, you're fully in the asset that didn't appreciate — you sold the winner at the top of your range. Below the lower bound, you're fully in the depreciating asset with no fee income to offset it. This is the core risk concentrated liquidity trades for its efficiency: a full-range LP never fully exits, a concentrated LP can. Compare the raw impermanent-loss math on the full-range IL calculator and the minimum fee APR needed to break even on the IL fee break-even calculator.
Why concentrated liquidity needs its own math
Every impermanent-loss calculator on the internet — including most of ours until now — models a Uniswap V2-style full-range position: liquidity spread evenly across every possible price from zero to infinity. Uniswap V3 changed the underlying math entirely by letting LPs concentrate their capital into a specific price range. The formula for liquidity depth given capital C at price P inside range [Pa, Pb] is L = C / (2√P − √Pa − P/√Pb), compared to L_full = C / (2√P) for a full-range position at the same price. The ratio of those two — the exact capital efficiency multiplier this calculator computes — is why a tight, well-chosen Uniswap V3 range can out-earn a V2 position by 3x, 10x, or more with the identical dollar amount deposited.
That efficiency isn't free. While price stays inside the range, the position behaves like a leveraged version of the equivalent full-range position — the same price move produces impermanent loss roughly proportional to the capital efficiency multiplier. A 0.5x-2x range (about 3.4x efficient) turns a 2% full-range IL into roughly 7% amplified IL for the same price move; a tight ±5% range (over 40x efficient at that width) turns modest moves into severe divergence loss extremely fast. Fee income scales up by a comparable factor while in-range, which is the actual trade being made, not free money — more fees per dollar, more IL risk per dollar, both concentrated into a narrower price band.
The risk unique to V3 is the range boundary itself. A full-range V2 LP never fully exits a pool regardless of price. A concentrated V3 LP does: cross either edge, and the position converts 100% into a single asset and earns zero fees until price returns or the range is manually rebalanced — often at a cost, tracked separately by the LP rebalancing cost calculator. Choosing a range is a direct trade-off between capital efficiency, amplified IL exposure, and how often you'll need to actively manage the position.