Price impact is the influence that a trade has over the market price of the underlying asset pair. It is directly correlated with the amount of liquidity/volume in the pool. Price impact can be especially high for illiquid markets/pairs, and may cause a trader to lose a large portion of his/her funds.

Here is an example of an illiquid swap on 1inch that would have a negative price impact:

If the user in this example were to continue with the swap, they would be trading $190.09 worth of ETH for $77.75 worth of DIP. This is because there are not enough sellers of DIP at the current market price to fulfill an order of this size.

To reduce the price impact of a swap, you can reduce the amount swapped, or wait for more liquidity to enter the market.

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