What this calculator computes
Four quantities decide whether a liquidity position was worth opening, and this tool resolves all four into one line:
- The hold benchmark — what the deposited assets would be worth today if you had never pooled them.
- The pool position — the same basket after the invariant rebalanced it, computed from the relative price ratio.
- Income — fees collected plus any incentive tokens valued at what you actually realised, not at the price when they accrued.
- Friction — gas across every transaction the position required, from approvals to the final withdrawal.
The net figure is income minus divergence minus friction. A positive result means providing liquidity beat holding the same assets over the same window.
Why the benchmark is the basket, not cash
A position can rise in dollar terms and still have been the wrong decision. If the pair appreciated, the pool sold the winner along the way, so the correct comparison is against the assets you deposited rather than against your starting currency. Reporting profit in dollars alone hides that gap, and it is the most common way liquidity results are misread. The mechanics are worked through in Impermanent Loss Examples.
Valuing incentive tokens honestly
Enter incentive income at the value you realised when selling, not at the quoted price when it accrued. Emission tokens are issued continuously and sold by most recipients, so quoted and realised values diverge, an effect examined in Real Yield in Liquidity Pools. Leaving the field at zero and treating retained tokens as a separate position is the cleaner approach.
What the model leaves out
- Concentrated ranges. This calculator models a full-range position. A narrow band amplifies divergence while in range, and once price leaves the band the position holds a single token and keeps falling behind holding as price moves further. For bands, use the impermanent loss calculator in range mode and read Out-of-Range Liquidity.
- Path dependency. Two paths ending at the same price produce the same answer here and different answers in reality, as covered in loss-versus-rebalancing.
- Entry and exit price impact. Reaching the deposit ratio and unwinding both consume depth. See Slippage and Price Impact.
- Partial withdrawals and additions. Model each tranche separately and sum the results.
Using it before rather than after
The most useful application is forward-looking. Enter a price you consider plausible, an honest estimate of fee income over the intended holding period, and the gas your management cadence requires. If the net result is negative under a reasonable price assumption, the position needs a different pair, a different structure, or a different size before any capital moves. Estimate the income side with the liquidity pool fee and APR calculator and isolate the divergence with the impermanent loss calculator.
Sources
The formulas, parameters and risk statements used by this tool come from protocol specifications, peer-reviewed and preprint research, and public-sector analysis of automated market making.
- Uniswap v3 Core Whitepaper (Adams et al., 2021)
- Automated Market Making and Loss-Versus-Rebalancing (Milionis et al., 2022)
- Automated Market Making and Arbitrage Profits in the Presence of Fees (Milionis et al., 2023)
- Risks and Returns of Uniswap V3 Liquidity Providers (Heimbach et al., 2022)
- Gas and Fees (Ethereum Foundation Documentation)
- What are the risks when providing liquidity? (Uniswap Labs)
Frequently asked questions
How do you calculate liquidity pool profit?
A liquidity pool profit calculator adds the fees collected to the current value of the position, then subtract the value the same deposited assets would have had if simply held, and subtract every transaction cost paid along the way. The remainder is the profit or loss attributable to providing liquidity.
What is the difference between LP return and LP profit?
Return is usually quoted against your starting capital in a single currency, which mixes market movement with the result of providing liquidity. Profit against a hold benchmark isolates what the pool did, which is the figure that tells you whether the position was worth opening.
Does this calculator include impermanent loss?
Yes. Divergence is computed from the price ratio between entry and now, then applied to the value of the deposited basket. It appears as its own line so you can see how much of the result it explains.
What annualised figure does this produce?
It annualises the net result over the days held, on the capital deployed. Treat it as a description of what happened rather than a forecast: fee income and volatility both vary, and a short window annualises noise.
Why is my position profitable in dollars but negative here?
Because the benchmark is holding the deposited basket, not holding cash. In a rising market a pooled position can gain in dollar terms while still trailing the assets it started with, and this calculator reports that gap explicitly.