How Do Automated Market Makers (AMMs) Handle Large-Scale Liquidations Compared to Traditional Order Books?

AMMs, unlike order books, use mathematical formulas (like x y=k) to determine price. Large liquidations in an AMM cause a significant shift along the curve, resulting in massive price impact and high slippage.

Traditional order books may halt trading or find a single large buyer. AMMs execute the trade immediately, but at a rapidly deteriorating price, contributing to a faster death spiral.