What is price impact?

Price impact is the effect of your own swap on pricing in a liquidity pool. Unlike movement caused by other market activity, its cause is directly related to your trade.

How do trade size and liquidity affect the price?

Buying assets from a pool can change its balance and trading price. Under otherwise similar conditions, a larger swap can have more impact than a smaller one, while deeper liquidity can reduce that effect. The pool model and execution route also matter.

Imagine a small trade using only a tiny fraction of the assets available, while a much larger one consumes a meaningful share of the liquidity. Their average execution prices need not match. A real impact percentage cannot be calculated from a ticker or daily trading volume alone.

Why are price impact and slippage different?

Price impact describes the mechanical effect of your trade; slippage compares the expected outcome with execution. Increasing slippage tolerance does not add liquidity or remove high price impact. The smart contract's execution conditions and the chosen route still need checking before treating the two terms as interchangeable.

Example

Consider a hypothetical constant-product pool holding 1,000 X tokens and 1,000 USDC, with fees excluded. Its starting ratio is 1 USDC per X. Adding 100 USDC buys about 90.91 X, for an average cost of 1.10 USDC per X. That 10% difference comes from your own trade changing the pool balance, rather than trades placed by other users. Not every pool uses this pricing model.