Fees must out-run divergence
Providing liquidity is a bet that trading fees outpace impermanent loss. This tool computes the exact break-even fee APR for any price move and horizon, so you know the hurdle before you deposit. Size the IL itself on the impermanent loss calculator.
The fee APR that makes an LP position worth it
Providing liquidity earns fees and pays impermanent loss; the position only beats simply holding the assets when fees out-earn the IL. This calculator finds the crossover: given an expected price divergence, the fee APR the pool must generate for LP to win.
The IL side of the ledger: a 1.5× divergence between the paired assets costs 2.0% of the position versus holding; 2× costs 5.7%; 4× costs 20%. For a volatile pair that plausibly diverges 2× over a year, the pool needs to clear roughly 6% in annual fees just to tie — before counting the smart-contract and depeg risks that hold no salary.
The pairs where LP genuinely works: stable-stable pools (near-zero divergence, so any fee APR is nearly pure), and high-volume volatile pairs where fee APRs run 20%+ because turnover is enormous. The quiet middle — moderate volume, volatile pair, 8% fee APR — is where most LP capital sits and most LP capital underperforms a plain 50/50 hold.