When I created a liquidity pool and started trading, I got alerts saying “insufficient liquidity” and “price impact too high”. What causes this and how do I fix it?
This is a very common issue, especially for newcomers. Here’s a clear breakdown:
• Insufficient liquidity — means the pool doesn’t hold enough value in its assets (e.g., USDT/BNB/ETH) relative to the trade sizes you want to execute. There’s no single universal threshold for “sufficient” liquidity — different wallets/exchanges use different rules. Some UI’s hide the warning only if a pool holds at least 5,000 USDT (or equivalent); others require 20,000 USDT.
• Price impact too high — mainly depends on trade size vs pool depth. Example: if a pool contains 1,000 USDT and 1,000 tokens, a single trade of 200 USDT equals 200 / 1,000 = 20% of that side of the pool, producing ~20% price impact. That triggers the “price impact too high” warning.
Fixes:
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Add liquidity to the pool. Increasing the USDT (or equivalent) in the pool to, say, 2,000 USDT will reduce the same trade’s impact (200/2000 = 10%), often removing the warning.
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Reduce trade size. If you can’t add liquidity, split trades so each is smaller (e.g., ≤100 USDT in the example), keeping price impact under ~10%.
Bottom line: both problems stem from underfunding the pool when it was created. If you seed the pool with a large amount (e.g., 100k USDT), these warnings basically disappear. If you don’t have that capital, the practical remedies are: add liquidity over time or reduce trade size.
Additional notes (correction/clarification):
• “Price impact” is an AMM (automated market maker) concept — it’s the expected slippage produced by the trade given pool reserves. Always set a safe slippage tolerance and check gas costs when slicing trades.