Why Are Low-Liquidity DEXs More Vulnerable to Flash Loan Price Manipulation?

Low-liquidity DEXs have shallower liquidity pools, meaning a relatively small trade can cause a large price change. This is due to the AMM formula, where the price curve is steeper with less capital.

A flash loan allows an attacker to easily supply enough capital to drastically shift the token ratio, and thus the price, with minimal slippage cost relative to the potential exploit profit.