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[Today’s Signal] Does an AMM-Based DEX Discover Prices—or Follow the Market?

Decentralized exchanges are often defined by the absence of a central intermediary. Their more fundamental innovation, however, lies in how prices are formed.

  • AMM DEXs determine prices via smart contracts and liquidity pools, not order book competition.
  • Arbitrageurs adjust AMM prices to align with market rates when divergence occurs.
  • AMMs crucial for initial pricing of long-tail or newly issued tokens lacking active order books.

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