Price Impact for Different Market Models in Cryptocurrency Trading
DOI:
https://doi.org/10.20535/tacs.2664-29132024.1.311513Abstract
Price impact in cryptocurrency trading plays a crucial role in understanding market dynamics and liquidity. The study presents a detailed mathematical analysis of price impact across three different market models: constant sum, constant product, and order book. Each model provides a unique perspective on how asset prices are influenced by trade execution, market depth, and available liquidity. By examining these models, the analysis highlights the relationship between trade volume and price changes, offering important insights into how large transactions affect the stability and behavior of prices in various liquidity environments. The results are relevant for traders and investors aiming to optimize their strategies in volatile markets, as well as for regulators seeking to mitigate the systemic risks posed by large-scale trades in the cryptocurrency space.
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