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How Is the Price of Assets Maintained within an Automated Market Maker (AMM) Pool?

x · y = k formula. Supply/Demand → Price change. Arbitrage → external price alignment.
Greeks.Live29.10.25

How Is the Price of Assets Maintained within an Automated Market Maker (AMM) Pool?

The price is maintained by a constant function formula, such as x · y = k, where x and y are the quantities of the two assets in the pool, and k is a constant. When a trader buys one asset, they reduce its supply and increase the other's, which algorithmically adjusts the price ratio to reflect the trade.

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