Что такое price impact
Price impact and how to calculate it
What is Price Impact?
Price impact is the difference between the current market price and the price you will actually pay when performing a swap on a decentralized exchange.
In the screenshot above, the price impact is 4.64%, meaning the price being paid for YFI is 4.64% higher than the current market price.
Price impact occurs because of the pricing model of the decentralized exchange. As the ratio of the assets in the pool changes, one asset becomes more expensive and one becomes cheaper. Supply of one asset increases and the supply of another asset decreases. This makes the decreasing asset more expensive.
The more that the ratio of the assets is shifted, the more that the price changes. Price impact is a bigger issue in lower liquidity pools where it’s easier to change this ratio compared to a pool with very large liquidity.
As an example, let’s say there is a liquidity pool with 1,000 ETH and 2,000,000 USDC. Given the ratio of each pool we can say that 1 ETH = 2,000 USDC. I’ll refer to this as the market rate.
Swaping 10,000 USDC for ETH in this example pool would put the price of ETH in this transaction at 1 ETH = 2009.64 USDC (price impact of 0.48%). If we were to swap even more, say 100,000, this would put the price of ETH in the transaction at 1 ETH = 2099.95 (price impact of 4.99%).
The reason that we can’t swap at the market rate (1 ETH = 2,000 USDC) is because this would mean that you could swap 2,000,000 USDC for 1,000 ETH in this example pool, and then subsequently be left with a pool with 0 ETH and 4,000,000 USDC. And that wouldn’t make much sense.
To understand the mechanics of this and to see how I got the price impact numbers above, see the calculation section below. But otherwise, it’s just a useful concept to understand, especially in lower liquidity pools.
Price Impact Calculation
This calculation uses the constant product formula used on Uniswap to determine how much of one asset should be swapped for another asset.
Some exchanges may have a slighty more complex formula to combat price impact or impermanent loss. But this is the most common and easiest to calculate.
Constant product formula: token_a_pool_size * token_b_pool_size = constant_product
constant_product will be the same number before and after a trade occurs.
A couple of examples to show price impact calculation:
Starting pool for both examples
First example, 10,000 USDC for ETH
Price paid per ETH = 2009.64 USDC
Second example, 100,000 USDC for ETH
price impact
Смотреть что такое «price impact» в других словарях:
Price impact costs — Related: market impact costs … Financial and business terms
price impact costs — Related: market impact costs … Financial and business terms
price effect — Impact of a change in interest rates on bond prices. Bloomberg Financial Dictionary * * * price effect price effect ➔ effect * * * price effect UK US noun [C] ► ECONOMICS the influence that the change in the price of a product has on a market or… … Financial and business terms
price floor — ➔ floor * * * price floor UK US noun [C] ► ECONOMICS, GOVERNMENT a lower limit set by a government on the price that can be charged for a product or service: » The price floor has a measurable impact on the market. → Compare PRICE CEILING(Cf. ↑ … Financial and business terms
Impact fee — Part of a series on Government Public finance … Wikipedia
Price index — A price index (plural: “price indices” or “price indexes”) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to… … Wikipedia
impact — <
Price Increase and Famine Resistance Committee — The Price Increase and Famine Resistance Committee was a mass movement in West Bengal, India, formed in late 1958 by the Communist Party of India and other left groups, in response to the ongoing food crisis. The PIFRC led one of the most massive … Wikipedia
Price ceiling — A price ceiling is a government imposed limit on how high a price can be charged on a product. For a price ceiling to be effective, it must differ from the free market price. In the graph at right, the supply and demand curves intersect to… … Wikipedia
Price of petroleum — This article is about the price of crude oil. For information about derivative motor fuels, see gasoline and diesel usage and pricing. For detailed history of price movements since 2003, see 2003 to 2011 world oil market chronology. Brent barrel… … Wikipedia
price impact
Смотреть что такое «price impact» в других словарях:
Price impact costs — Related: market impact costs … Financial and business terms
price impact costs — Related: market impact costs … Financial and business terms
price effect — Impact of a change in interest rates on bond prices. Bloomberg Financial Dictionary * * * price effect price effect ➔ effect * * * price effect UK US noun [C] ► ECONOMICS the influence that the change in the price of a product has on a market or… … Financial and business terms
price floor — ➔ floor * * * price floor UK US noun [C] ► ECONOMICS, GOVERNMENT a lower limit set by a government on the price that can be charged for a product or service: » The price floor has a measurable impact on the market. → Compare PRICE CEILING(Cf. ↑ … Financial and business terms
Impact fee — Part of a series on Government Public finance … Wikipedia
Price index — A price index (plural: “price indices” or “price indexes”) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to… … Wikipedia
impact — <
Price Increase and Famine Resistance Committee — The Price Increase and Famine Resistance Committee was a mass movement in West Bengal, India, formed in late 1958 by the Communist Party of India and other left groups, in response to the ongoing food crisis. The PIFRC led one of the most massive … Wikipedia
Price ceiling — A price ceiling is a government imposed limit on how high a price can be charged on a product. For a price ceiling to be effective, it must differ from the free market price. In the graph at right, the supply and demand curves intersect to… … Wikipedia
Price of petroleum — This article is about the price of crude oil. For information about derivative motor fuels, see gasoline and diesel usage and pricing. For detailed history of price movements since 2003, see 2003 to 2011 world oil market chronology. Brent barrel… … Wikipedia
What is price impact vs. price slippage in DeFi?
In this article, we will cover:
What is Price Impact?
Price impact is the influence of user’s individual trade over the market price of an underlying asset pair. It is directly correlated with the amount of liquidity in the pool / Automated Market Maker (AMM). Price impact can be especially high for illiquid markets/pairs, and may cause a trader to lose a significant portion of their funds.
Here is an example of an illiquid swap on 1inch that would have a negative price impact:
Price impact can also be positive too! If the pool is imbalanced in the opposite direction, your trade might take place at a discount relative to the pool. This is also known as an arbitrage opportunity.
What is the difference between Price Impact and Price Slippage?
Price impact and price slippage are very similar; however, there is a nuance.
Price slippage refers to the change in price caused by external broad market movements (unrelated to your trade), while price impact refers to the change in price directly caused by your own trade itself.
Like price impact, slippage is also highly dependent upon the liquidity in a pool. If the token pair as a low amount of liquidity, it takes smaller collective market movements to cause significant changes to the pool’s rate.
Slippage can be positive as well. If the rate changes in a favorable direction, a surplus amount of tokens is returned for the swap. Currently on 1inch network, 100% of the «swap surplus» is distributed to the 1inch Network Treasury and Referrers.
How to minimize negative price impact
By design, the 1inch Network pathfinder algorithm will automatically split your trade amount between multiple liquidity sources. This ensures that you will have minimal negative price impact for your trade.
Please note: The 1inch router cannot optimize price impact for illiquid tokens with only one liquidity source.
To manually reduce the price impact of a swap, you can reduce the amount swapped, or wait for more liquidity to enter the market. For many «less reputable projects» or scam tokens, this liquidity will never show up. Also, it is strongly recommended to confirm that the amount of tokens in the «You Receive» section is the correct amount of tokens for the current market rate.
How to control slippage
1inch has a very effective tool for handling slippage. It is called the «slippage tolerance» feature, and allows users to set a desired percentage of tolerable slippage for their trade.
This feature can be accessed within the swap settings.
***For users’ convenience, the ‘slippage tolerance’ indicator can be pinned to the swap page by clicking on the pin icon next to it in the settings (Classic Mode only).
If the returned token amount falls beyond the allotted slippage tolerance between the time of submission and the time of confirmation, the transactions will fail. While failed transactions do cost gas fees (that cannot be returned), it prevents a further loss of funds do to the slippage.
What happens if I set the slippage tolerance too high or too low for a transaction?
There is often a «sweet spot» for setting the slippage tolerance. This ideal amount varies based on each individual token, transaction, and your personal risk tolerance.
When the slippage tolerance is set really high, it allows the transaction to still complete despite large price swings. This can open the door to front-running and sandwich attacks. A sandwich attack is a variation of front-running, where an attacker sees a pending transaction, then places a significantly larger transaction (with the same tokens) directly before and after the victim’s transaction. This drives the price of the victim’s transaction up, effectively allowing the front runner to extract the difference in value. Since the victim’s slippage tolerance is so high, the attacker can extract that much value from the attack. This could easily be prevented by setting a lower slippage tolerance in combination with enabling the «partial fill» setting, or using the ‘Flashbots’ feature.
If the slippage tolerance is set too low, then the transaction can fail (revert) if the price moves beyond the % that was set. While a low tolerance can prevent front running, it can also cause a loss of gas fees to the failed transaction.
Questions, comments, concerns? Feel free to let us know in the live support chat!
price impact
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См. также в других словарях:
Price impact costs — Related: market impact costs … Financial and business terms
price impact costs — Related: market impact costs … Financial and business terms
price effect — Impact of a change in interest rates on bond prices. Bloomberg Financial Dictionary * * * price effect price effect ➔ effect * * * price effect UK US noun [C] ► ECONOMICS the influence that the change in the price of a product has on a market or… … Financial and business terms
price floor — ➔ floor * * * price floor UK US noun [C] ► ECONOMICS, GOVERNMENT a lower limit set by a government on the price that can be charged for a product or service: » The price floor has a measurable impact on the market. → Compare PRICE CEILING(Cf. ↑ … Financial and business terms
Impact fee — Part of a series on Government Public finance … Wikipedia
Price index — A price index (plural: “price indices” or “price indexes”) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to… … Wikipedia
impact — <
Price Increase and Famine Resistance Committee — The Price Increase and Famine Resistance Committee was a mass movement in West Bengal, India, formed in late 1958 by the Communist Party of India and other left groups, in response to the ongoing food crisis. The PIFRC led one of the most massive … Wikipedia
Price ceiling — A price ceiling is a government imposed limit on how high a price can be charged on a product. For a price ceiling to be effective, it must differ from the free market price. In the graph at right, the supply and demand curves intersect to… … Wikipedia
Price of petroleum — This article is about the price of crude oil. For information about derivative motor fuels, see gasoline and diesel usage and pricing. For detailed history of price movements since 2003, see 2003 to 2011 world oil market chronology. Brent barrel… … Wikipedia