Crypto Trading Slippage Meaning and Tolerance

Crypto Trading Slippage Meaning and Tolerance

Here we cover crypto trading slippage meaning and tolerance. We compare the slippage for some of the major crypto markets at some of the top Bitcoin and altcoin trading sites.

Also, we cover how to find the slippage yourself.

No Financial Advice, Information only. Do your own research. Cryptocurrencies are high-risk investments

What does crypto trading slippage mean?

Crypto trading slippage refers to the difference between the market price of a trade and the price at which the trade is executed. 

How can a trade differences between the market price and the execution price?

There are several factors that can cause this and the crypto trading spread and the crypto trading slippage are the two most common.

The slippage can appear in any trade but is most visible when a large market trade is executed in a thin order book. 

The above occasion will cause the market trade to have to accept higher ask orders or lower bid orders since the order book is thin in volume.

 

What is a trading slippage tolerance in DeFi?

An example of crypto trading slippage is if you want to buy 4 Bitcoin and the market price is $50.000 (The market price reflects what the latest agreed trade was executed for)

However, in the order book, you find these selling orders

  • 2 Bitcoin for $50.010
  • 2 Bitcoin for $50.020

Your average buy price is now $50.015 and the spread was $10 and the slippage $5.

 

What is a trading slippage tolerance in DeFi?

In Defi, at Uniswap and Pancakeswap, there is no order book.

When you buy at the market price you can set “Slippage Tolerance” as a percentage. Instead to place limit orders in price, you set limit orders as slippage tolerance.

How to find the best exchange with the lowest crypto trading slippage?

There is an easy way to find the best exchange with the lowest crypto trading slippage.

One way to measure slippage is how much capital you need to move the market. If you need a little amount of capital to move the market a lot, the slippage is high and vice versa.

At Coingecko, there is a tab marked as +-2%. This means how much capital you need to move the market 2% in either direction.

You find the tab by going to Coingecko and searching for your market. After this, you find a market tab where you click.

  • If the amount of capital is large the slippage is low. This is what large traders are looking for and often they might even trade off the market via an OTC desk (over the counter).

In the graph above you find the slippage for BTC/USDT and ETH/USDT at Binance, Kucoin, Kraken, and FTX US. When it requires large trading volumes to move the market +2% or -2% the slippage is low. Here, you find that you can trade the largest volumes on Binance before you move the market up or down 2%. At the same time, you find that it takes smaller volumes to move the market at Kucoin.

You can easily say that Binance is the best crypto trading site when comparing slippage in the ETH/USDT and BTC/USDT markets at this point.

It’s worth mentioning that slippage is dynamic (compared to fees that are static). This means that they change all the time and look different from time to time.

Crypto trading slippage in table format

In the table below, you find the exact same numbers as in the graph above expressed in a different graphic view.

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