When executing a Swidge, users may receive a high price impact warning. This messaging is designed to protect users by indicating that their trade may significantly affect the market price of the token they are trading.
What is Price Impact?
Price Impact refers to the change in a token price directly caused by your trade. It represents the difference in the current market price and the adjusted price caused by your trade's effect on the pool's available liquidity. This is especially common when:
The token has low liquidity (e.g. new tokens)
The trade occurs on less popular networks
The trade size is particularly large
Why It Matters
These types of trades will typically result in far less tokens than the user expected, as the market price will move with the trade. A warning will be given to users to make them aware of this.
Recommendations to Reduce Price Impact
If you receive a high price impact warning while Swidging, consider the following:
Break your Swidge into smaller trades, this can help lessen the price impact to the market
Trade tokens with higher liquidity. Popular tokens or networks have deeper liquidity pools
Switch networks. If the token you’re Swidging has low liquidity on one chain (e.g. Optimism), it may have better liquidity on another (e.g., Base)
Example Scenario
Imagine you're swidging 1000 USDC for $DRV on Optimism, a token which has low liquidity on this particular network. Because your trade represents a large proportion of the available $DRV in the pool, it would have a substantial effect on the token's price. As a result, you would end up receiving far less $DRV than you initially anticipated.
What You Can Do:
Break the 1000 USDC into smaller Swidges (e.g., 200 USDC per trade).
Instead, Swidge to $DRV on the Base network, where the token may have more liquidity and thus less price impact.