Before you join a 50/50 liquidity pool, compare its likely fees with the value you could lose as token prices move apart. A pool is a shared pot of two tokens that traders swap against. Your deposit helps serve those trades, but your token amounts can change while you earn fees.
What should you check first?
Start with three checks: how the pool changes your holdings, how far prices might move, and whether fees could cover the gap.
- Compare providing liquidity with simply holding both tokens.
- Estimate how a price change would alter your share of the pool.
- Check likely fee income over the time you plan to stay.
The difference between the first two outcomes is called impermanent loss. It is the shortfall in pool value compared with holding the same tokens, before counting fees. The name can mislead: the gap is real when you withdraw, though it can shrink if prices return to their starting ratio.
A 50/50 pool means you deposit equal values of two tokens, such as $500 of ETH and $500 of a stablecoin. A pool on the SyncSwap crypto exchange lets you put both tokens to work for traders, while your share of fees depends on pool activity. The pool adjusts token amounts as trades change its balance.
How much can a price move change your result?
In a basic 50/50 pool, a token’s price doubling can leave you about 5.7% behind holding, before fees. For example, if ETH rises from $2,000 to $4,000 while the stablecoin stays near $1, your pool share ends up with less ETH and more stablecoin than your original deposit.
Here is the mechanism: traders buy the token that has become more valuable and add the other token to the pool. The pool’s pricing rule keeps the product of its two token balances roughly constant. Arbitrage traders—people who trade to close price gaps between markets—help bring the pool price in line with other markets.
For a simple pool, the estimated shortfall is 2√r ÷ (1 + r) − 1, where r is the new token price divided by its starting price. At double the price, that gives about −5.7%; at four times the price, about −20%. These estimates exclude fees and assume a basic pool that adjusts across all prices.
That assumption matters. A Stable Pool is designed for tokens expected to stay near the same value, so a depeg—a token losing its intended price—can change the risk sharply. Other pool designs may work differently, and a concentrated range can stop earning fees outside the prices you chose. On SyncSwap, check the specific pool type and token pair before using the basic estimate.
When can fees make providing liquidity worthwhile?
Fees can offset the shortfall, but a quoted annual rate is only a snapshot, not a promise. Your actual fees depend on trading volume, the pool’s total liquidity, your share, and how long you stay; token prices can also change during that period.
For a practical comparison, estimate your likely withdrawal value under a few price outcomes, then add a cautious fee estimate for your holding period. Compare that total with what the same deposit might be worth if held untouched. SyncSwap’s displayed rate can help you compare pools, but it cannot predict future volume or prices.
Before depositing, confirm the pair, pool type, deposit amounts, and any fee shown in the transaction. You may also need the network’s native token to pay transaction costs. If a token’s price could move far, or you need predictable holdings by a set date, holding may fit better; if prices are likely to stay close and trading is active, fees may make the pool more attractive.