Home » Finance » Cryptocurrency » When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?

When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?

Lim How Wei
February 5, 2024

OverWallet is a blockchain entry with a soft-landing reward system.

You can get point rewards by completing daily activities and missions like quizzes.

The Blockchain Learning Hub has daily quizzes to enhance your blockchain knowledge.

To get started, sign up using this link mobile.over.network/en/invite/3SDAUQX99B or use “3SDAUQX99B” as the invitation code.

When you sign up using the invitation code, you’ll get a 1,000 P bonus.

To begin a quiz, open the OverWallet app, select the “Missions” tab, and select “Daily quiz”.

In this guide, you’ll learn the answer to “When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?” in OverWallet.

When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?

Question: When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?

Answer: Price Impact.

Further reading

Which blockchain platform is known for its focus on enhancing privacy through features like Confidential Transactions and Bulletproofs?

What are the losses that liquidity providers may experience when the exchange rates for token trading pairs on a DEX increase significantly?

What do we call the entity that provides liquidity to the liquidity pool on a DEX?

Tags
FacebookXLinkedInEmail

About the author

View All Posts

Lim How Wei

Lim How Wei is the founder of followchain.org, with 8+ years of experience in Social Media Marketing and 4+ years of experience as an active investor in stocks and cryptocurrencies. He has researched, tested, and written thousands of articles ranging from social media platforms to messaging apps.

Lim has been quoted and referenced by major publications and media companies like WikiHow, Fast Company, HuffPost, Vice, New York Post, The Conversation, and many others. One of his articles about the gig economy was quoted by Joe Rogan who hosts The Joe Rogan Experience (arguably the most popular podcast in the world), in the This Past Weekend podcast by Theo Von.

In his free time, Lim plays multiple games like Genshin Impact, League of Legends, Counter-Strike, Hearthstone, RuneScape, and many others. He creates guides, walkthroughs, solutions, and more on games that he plays to help other players with their progression.