In basic AMM mechanics, the available liquidity distributed across a wide price curve results in slippage within a given range of prices. If the token is only traded within a tight price range, (as buyers don’t want to overpay and sellers don’t want to undersell), then only a small share of the total liquidity is being used for trading.
The effects of slippage and price impact are particularly evident in long-tail assets where the available liquidity is low. To minimize price impact, users have to trade at a venue with the deepest market or a pool with liquidity in the desired price range.
