What the relative price multiplier means
A multiplier of 2 means the first asset doubles relative to the second. A multiplier of 0.5 means it halves. It is a ratio between asset prices, not automatically the dollar-price change of either token by itself.
For an idealized 50/50 constant-product pool, relative performance versus holding is 2 times the square root of the ratio, divided by 1 plus the ratio, minus 1. At a ratio of 2, the result is approximately −5.72%.
Dollar loss depends on the holding baseline
The percentage loss applies to the ending value of holding the original assets, not to the initial deposit value. Under the model’s stable reference-price assumption, the ending holding baseline is the initial total multiplied by the average of 1 and the price ratio.
That distinction matters: a pool can rise in dollar value and still underperform holding. A negative relative-performance figure is not necessarily a negative absolute investment return.
Fee income is a separate scenario
Supplied earned fees are added to the modeled pool outcome for comparison. They are not forecast from historical volume and are not assumed to compound. Real outcomes depend on actual fee income, transaction costs, changing liquidity and protocol mechanics. The constant-product formula should not be applied unchanged to a concentrated-liquidity position.
Questions about this tool
Is the loss guaranteed to disappear if I wait?
No. The term describes relative performance as prices change. Waiting does not guarantee a return to the initial relative price.
Does this work for Uniswap V3 concentrated positions?
No. It is a full-range 50/50 constant-product model. Range-dependent positions need a different calculation.