Price Impact

Why It Matters

Price impact determines how much value a swap loses to its own market movement before it is submitted. A quote with high impact can make an apparently favorable token price misleading. Checking it helps traders compare trade sizes and routes, especially in a new or thin liquidity pool.

How It Works and What Affects It

In an automated market maker, a swap changes the balance of assets in the pool and moves the quoted price along the protocol’s curve. The main factors are order size relative to usable liquidity, liquidity depth near the current price, and how liquidity is distributed across price ranges. Routing through different pools can therefore produce different quoted outputs.

How to Use and Interpret It

Read price impact beside the expected output, swap fee, minimum received, and route. Compare smaller trade sizes or routes through a reputable DEX aggregator. Do not assume a percentage is safe merely because the interface allows it.

Example: Ignoring fees, a mid-price implies that $1,000 should buy 1,000 tokens. If the quote returns 970 tokens because the trade moves the pool, the quoted price impact is about 3%. If only 960 tokens arrive after market conditions change, the additional deterioration versus the quote is about 1.03% slippage, while the total shortfall versus the initial mid-price is 4%.

Common Mistakes

Do not use price impact and slippage as exact synonyms. Price impact is caused by the trade itself and is estimated in the quote. Slippage describes quote-to-execution change or, in some interfaces, the broader expected-versus-actual difference. Price impact is also not a network fee or swap fee. A low displayed impact does not guarantee final execution, and splitting a trade may add fees or leave later portions exposed to a changed pool.

Treat price impact as a quote-time cost signal, not a promise about the final fill.