When cryptocurrency traders submit a buy or sell order on an exchange, they want it to be filled at the exact price they specify. Unfortunately, due to a costly problem known as slippage, this isn't always the case. So what is slippage in crypto? The answer is a difference in what you think you’re paying to acquire crypto and the actual cost you pay.
It happens when you have to settle for a different price than what they initially requested due to a movement in price between the time the order enters the market and the execution of a trade. This may happen in any market, including forex and stocks. Due to the high levels of price volatility, it is more common and much worse in crypto markets, particularly on decentralized exchanges. In addition, common pain points that the vast majority of altcoins suffer from such as low volume and liquidity may also contribute to slippage.
Here is the example when Tom trying to place a market order for BTC on Sushiswap. He’s purchasing 0.1 units at $55,000 and expects to pay $5,500. However, BTC is volatile at the moment, and the price rises to $58,000 before Tom’s order goes through. Instead of executing for 0.1 units at $55,000, his order actually executes for 0.1 units totaling $58,000.
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