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.
FAQ
What is the capital efficiency multiplier in Uniswap V3?
Uniswap V3 lets you concentrate liquidity into a price range instead of spreading it across the full 0-to-infinity curve like V2. The multiplier tells you how much more fee-earning liquidity depth the same dollar amount provides inside your chosen range compared to a full-range V2-style position. A common reference point: providing liquidity in a 0.5x-2x price range around the current price gives roughly 3.4x the capital efficiency of full-range — the same capital earns like it were 3.4x larger, as long as price stays inside the range.
Why does impermanent loss get amplified in a concentrated range?
Because your capital behaves like a leveraged version of a full-range position while price is inside your range, the same price move produces proportionally more impermanent loss — roughly the capital efficiency multiplier times the standard IL percentage. A price move that costs a full-range LP 2% might cost a tight-range LP 7-40%+, depending how tight the range is. Fee income scales up by a similar factor while in range, which is the trade you're making — more fees and more IL risk, concentrated into a narrower price band.
What happens when price exits my range?
Once price crosses either edge of your range, your position stops earning fees entirely and converts fully into whichever single asset was left. If price rises above your upper bound, you're left fully in the quote asset — you've effectively sold your appreciating asset at the top of your range and now hold cash while it keeps rising. If price falls below your lower bound, you're left fully in the base asset — you're now a full bagholder with zero fee income until price returns or you manually rebalance the range.