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BTCC / BTCC Square / Global Cryptocurrency /
Mechanism Behind Automated Market Maker Pricing Revealed in Xenea Quiz

Mechanism Behind Automated Market Maker Pricing Revealed in Xenea Quiz

Author:
Global Cryptocurrency
Published:
2025-05-12 13:35:01
15
3

Automated market makers (AMMs) determine asset prices through algorithmic mechanisms rather than traditional order books. The process relies on mathematical formulas, typically constant product formulas like x*y=k, to maintain liquidity and set exchange rates dynamically.

This decentralized pricing model has become fundamental to decentralized finance (DeFi), enabling 24/7 trading without intermediaries. The approach contrasts sharply with centralized exchanges where prices reflect direct buyer-seller matching.

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Risk warning: Digital asset trading is an emerging industry with bright prospects, but it also comes with huge risks as it is a new market. The risk is especially high in leveraged trading since leverage magnifies profits and amplifies risks at the same time. Please make sure you have a thorough understanding of the industry, the leveraged trading models, and the rules of trading before opening a position. Additionally, we strongly recommend that you identify your risk tolerance and only accept the risks you are willing to take. All trading involves risks, so you must be cautious when entering the market.

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