What is Price Impact?
Price impact signifies the effect your transaction has on the market price of a token. It's observed as the variance between the market's current price and the price after your trade influences the pool's liquidity.
The extent of price impact you encounter is closely tied to a liquidity pool's size. In essence, trades within higher liquidity pools tend to cause minimal price impact, whereas those in pools with lower liquidity can lead to significant price shifts. Consequently, a substantial price impact could mean receiving a less favourable price for your trade.
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Price impact is a dynamic metric, fluctuating in response to the ongoing shifts in supply and demand within a liquidity pool.