$BTC Slippage and price impact are two of the
most commonly confused terms in DeFi.
Most users treat them as interchangeable.
They describe different things and
understanding both changes how you set
up swaps.
Price impact is what your specific trade
does to the pool's price. When you buy an
asset from a liquidity pool you are
removing that asset from the pool and
adding the asset you're selling. This
changes the ratio of assets in the pool
which changes the price. A small trade in a
deep pool produces minimal price impact.
A large trade in a shallow pool produces
significant price impact, you effectively
move the market against yourself as you
execute.
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