What Is “Slippage” and How Does It Relate to Illiquidity in DEXs?

Slippage is the difference between the expected price of a trade and the price at which the trade is executed. In illiquid Decentralized Exchanges (DEXs), especially those using Automated Market Makers (AMMs), a large sell order will consume all available liquidity at the current price level and move to lower price levels.

This lack of depth causes high slippage, meaning the seller receives significantly less than expected, exacerbating panic.