# AMM Liquidity Providers Trail Hold Strategy as Prices Shift

> Liquidity providers can trail a hold strategy when token prices shift, per AMM models.
- Title: AMM Liquidity Providers Trail Hold Strategy as Prices Shift
- Summary: Liquidity providers can trail a hold strategy when token prices shift, per AMM models. Liquidity providers may lose value compared to holding assets if token…
- Keywords: impermanent loss, automated market maker, liquidity provider, token price, constant product amm, uniswap v3, uniswap v4, fee income, concentrated liquidity, crypto, finance, AMM
- Source: TokenPost — https://tokenpost.com/news/investing/33294
- Published: 2026-10-16T13:55:39+00:00
- Read time: 1 min
- Topics: impermanent loss, automated market maker, liquidity provider, token price, constant product amm, uniswap v3, uniswap v4, fee income, concentrated liquidity, crypto, finance
## Impermanent loss definition
Impermanent loss compares an automated market maker position to holding original assets at a given time.
## Constant-product AMM model
Traders swap directly against a token pool following x × y = k, where x and y are token amounts.
## Price shift impact
If ether rises against usdc, the pool ends up with less ether and more usdc, changing the liquidity provider's position.
## Simplified formula
The relative difference from holding is 2√r / (1 + r) - 1, where r is the new relative price divided by starting relative price.
## Hypothetical example
One eth at $2,000 and 2,000 usdc initially worth $4,000; eth doubles to $4,000, pool holds 0.7071 eth and 2,828.43 usdc.
## Price decline effect
A decline in relative price can also create a gap between the pool and holding, returning to zero if prices return to starting point.
## Concentrated liquidity
Uniswap v3 and v4 let liquidity providers choose price intervals, earning fees while active within those ranges.
## Key takeaway

Liquidity providers may lose value compared to holding assets if token prices change, even with increased pool value.