When trading on a DEX, what is the loss that can occur when the size of the liquidity pool is small compared to the size of the transaction?
Options
A) Slippage
B) Price impact
C) Commission
D) Spread
Correct Answer
The correct answer is Price impact.
Explanation
Price impact occurs when the size of a transaction is large compared to the liquidity available in the market. It leads to the actual execution price deviating from the expected price due to the impact of the trade on the market. So, the correct answer is B. Price impact.
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