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What Is Slippage in Crypto?

In the cryptocurrency market, slippage is the difference between the requested price of a trade and the total price at which the order was actually filled. In other words, it is what happens when the crypto asset you wanted to buy or sell gets traded at a different price than what you expected and it can be a trader’s worst enemy.

More often than not, slippage is negative, which means that your trade gets executed at a worse price than you initially expected. Slippage can sometimes be positive and benefit the trader as well, though is definitely the exception to the rule as this isn’t often the case.

Using the BitPrime OTC platform, cryptocurrency investors can avoid slippage and save money when executing large orders to buy or sell cryptocurrency.

slippage

 

How Does Slippage Occur?

When an investor wants to buy a large amount of digital assets, such as Bitcoin, but there are not enough of those assets in one place, or no opposite limit orders are available to fulfil it at the expected price, they can only get a part of what they want at the price they want. This means they may have to pay more for the remainder of their order as it is filled by multiple smaller orders, usually increasing in price.

Slippage is particularly common on typical cryptocurrency exchanges because of the high volume of orders being placed at one time, causing rapid movement (high volatility) in the price of the cryptocurrency. When you place an order on an exchange it takes time for your order to move through the order book to find a matching offer. In many cases, that matching offer may no longer be available when your order reaches it, leading to a difference in prices.

Some exchanges even have what’s known as latency issues, where gaps in their software allow slippage to occur by allowing other trades to slip in ahead of yours. If there is high volatility (i.e. sharp rises or falls) in the market there is also likely to be a high order volume which can overwhelm exchanges, causing them not to be able to match orders efficiently without significant slippage occurring.

 

What Causes Slippage?

Slippage can occur in any market, but it is more common in markets where there is low liquidity combined with high volatility, such as the cryptocurrency market. As liquidity decreases, slippage usually increases.

It’s most likely to happen when a major event occurs and many traders enter or exit the market at once. Significant events can include those such as new coin launches, a major exchange hack, or even a major holiday causing there to suddenly be more buyers or sellers of a particular coin.

A large market buy order can move the entire crypto market and cause prices to rise, resulting in a slippage loss for a buy order. The greater the amount of cryptocurrency you wish to purchase or sell, the more potential there is for slippage.

In other markets – like stocks and transactions on the New York Stock Exchange – slippage is less common, but it can still happen.

 

How Can You Avoid Slippage When Buying or Selling Large Cryptocurrency Amounts?

Although slippage is a normal occurrence in any market, BitPrime’s OTC platform offers users an easy way to avoid slippage on high-volume trades.

An investor decreases their chances of slippage by using the BitPrime OTC platform, as we ensure the entire order is filled at the price requested.

How do we do this? We’ve built trusted relationships with other OTC trading institutions, allowing us to access large amounts of trade liquidity without disturbing the exchange markets. The result is no slippage, regardless of what’s happening in other markets.

 

Learn more about BitPrime’s OTC trading desk and how to apply

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