How to Calculate an Active Price Range from Price Ratio
The price ratio determines the active price range of the user’s LP position by providing the lower-bound and upper-bound of the asset price that the user’s liquidity in the position will be put to use during AMM swaps; therefore, earning trading fees.
Users can simply calculate the active price range by using these formulas,
Lower bound of asset price in active price range
= current asset market price / provided price ratio
Upper bound of asset price in active price range
= current asset market price * provided price ratio
If users provide liquidity on the WETH-USDC pool with the price ratio of 2x when the market price of WETH is 2000 per USDC, users are providing liquidity on an active price range of 1000 to 4000.