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How Does a Decentralized Exchange (DEX) Manage the Price Impact of a Large Liquidation?

Relying on deep liquidity pools and advanced mechanisms like virtual liquidity or cross-DEX aggregation to minimize slippage.
Greeks.Live12.11.25

How Does a Decentralized Exchange (DEX) Manage the Price Impact of a Large Liquidation?

DEXs manage large liquidations by relying on the depth of their liquidity pools. Automated Market Makers (AMMs) use their pricing curve to absorb the large sale, but this causes slippage.

More advanced DEXs use 'virtual liquidity' or 'limit order books' to spread the impact across multiple price points or integrate with other DEXs to find the best execution price, minimizing price impact.

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