Why a quote can worsen after liquidity providers withdraw

Removing liquidity can leave the initial local price unchanged while making the same trade larger relative to the remaining reserves. The result is a worse average execution rate, even without a starting-price move.

Hold price fixed and change depth

Take a hypothetical fee-free constant-product pool with 100,000 units of each asset. A 1,000-unit input returns about 990.099010 output. Now assume a proportional withdrawal halves both reserves to 50,000. The initial one-for-one ratio is unchanged, but the same input returns about 980.392157.

The difference is approximately 9.706853 output tokens. This isolates a depth change from a price change under the chosen model.

Not all withdrawals are proportional in effect

Uniswap v2 pool shares represent claims on pool liquidity. In concentrated systems, removing an in-range position can affect the traversed region more than removing capital far outside it.

A total TVL decline therefore does not uniquely predict the impact on your particular trade. Location and direction matter as well as amount.

Requote after material state changes

A quote made before the withdrawal is not evidence of current executable capacity. Obtain a fresh quote and preserve its state. If the transaction was already submitted, its receiving or spending constraints govern whether the changed execution remains acceptable.

Do not infer a price crash solely from a poorer size-specific quote. In the hypothetical example, the spot ratio stayed constant while depth declined. Conversely, real withdrawals can coincide with market moves, so a complete analysis may need to separate both effects.

For a comparison report, show the reserve or range change and the matched trade size. That makes clear whether the claim concerns less deposited value, less local depth or a demonstrably lower output for the requested swap.