Liquidity & Price Sources

Liquidity

Liquidity refers to the ability to buy or sell an asset quickly without causing significant price fluctuations.

• High Liquidity: Ample buy/sell orders, where large trades have little impact on price.

• Low Liquidity: Sparse buy/sell orders, where large trades may cause sharp price changes (greater slippage).

• Source: Liquidity primarily comes from pools on decentralized exchanges (DEXs) such as Uniswap, PancakeSwap, etc., contributed by liquidity providers in the form of token pairs.

Price Sources

In aggregation trading, prices are not determined by a single exchange. Instead, they are derived by comparing multiple liquidity sources to identify the optimal result.

• On-chain Prices: Directly from DEX trading pairs and liquidity conditions.

• Aggregation Calculation: Aggregators compare prices and costs across multiple DEXs through routing algorithms, selecting the best path for execution.

• Dynamic Updates: Prices change in real time with on-chain transactions and liquidity, making quotes time-sensitive.

Advantages of Aggregated DEXs

• Better Prices: Consolidates liquidity across platforms to reduce slippage caused by insufficient liquidity on a single exchange.

• Higher Fill Rate: Finds executable trading paths from multiple liquidity sources, lowering the chance of failed transactions.