In my last post, I shared how AMMs (like PancakeSwap) run on a simple formula:
🧮 X × Y = K — price changes when token balances shift.
And not long after writing that… I saw this:
📉 One giant red candle, followed by a bounce.
(Screenshot below from a pool I was watching)
What likely happened:
🐳 A big trader made a massive swap in a pool with shallow liquidity.
→ The price dropped sharply
→ Then recovered as others reacted
→ That’s AMM math in real life — prices moving with every trade.
As someone who’s learning and preparing to become a liquidity provider, this was a good reminder:
✅ Small pools = good potential for fee income
⚠️ But also = higher risk of sudden price swings
⚠️ And exiting during a dip can mean impermanent loss
It’s one thing to read about how AMMs work.
But seeing this on the chart made the theory more real and practical.
Have you ever watched something like this unfold?
Or had a similar moment where DeFi mechanics suddenly made sense?
Would love to hear your take.
