What is price impact?

Stabull.Finance is laser-focused on improving “capital efficiency” for an FX stablecoin-focused AMM to enable stables waps in their purest form by building on top of the lessons learned of earlier iterations from AMMs like Uniswap, Curve, and DFX. It is designed to minimize slippage as much as possible considering pool liquidity and other factors.  

In the context of a crypto decentralized exchange (DEX), “price impact” refers to the effect that a single trade has on the price of an asset within the exchange’s liquidity pool. It is the influence of an individual’s trade on the price of an asset.

For a particularly illiquid asset pairing, an individual trader’s price impact can greatly affect price and they may lose a significant portion of their funds. 

Stabull.Finance is laser-focused on improving “capital efficiency” for an FX stablecoin-focused AMM to enable stables waps in their purest form by building on top of the lessons learned of earlier iterations from AMMs like Uniswap, Curve, and DFX. This model is designed to minimize potential exchange imbalances like price impact.

Traders can also play an active role in reducing price impact – To reduce price impact and slippage, traders can utilize various strategies, such as splitting large orders into smaller ones, adjusting the trade parameters (e.g., slippage tolerance), or trading during periods of higher liquidity. Additionally, liquidity providers play a crucial role in minimizing price impact by adding liquidity to the pools, thus increasing the depth of the market and reducing the impact of trades on prices.