The cryptocurrency market is open 24 hours a day and seven days a week. It is highly liquid and moves fast. If you blink, the price of digital currencies, be they Bitcoin or Cardano, will change instantly.
While this type of ecosystem offers many benefits for investors, there can also be a drawback for many retail and professional traders. One of these components that you need to watch out for is crypto slippage, and it can be challenging to avoid in a market that seemingly functions at the speed of light.
Wait a minute.
So, what is slippage in crypto anyway?
Here is a question: How many times has this happened to you?
You plan to buy or sell a digital currency at a predetermined price. You see your target, but then by the time you execute the trade, it will be above or below your target. This is known as crypto slippage.
Crypto slippage can occur at any time of the trading day, especially during periods when there are higher volatility levels amid investors utilizing market orders for their traders. Moreover, it can also happen when an immense order has been completed, but there is not enough volume at the selected price to keep the present bid/ask spread.
Ultimately, because of slippage, you may be forced to buy or sell at either a higher or lower price than you intended. So, therefore, it may be a good thing or a bad one for your trading endeavours. It depends on how you make out once the trade has been settled.
Here are two examples: negative and positive slippage.
First, an instance of a negative slippage is when you want to buy Litecoin at $57 per token. You see that it is approaching this level. Once it strikes this dollar amount, you place a buy order, but once your order has been finalized, you will see that you got in at a higher price of $57.25.
Second, an example of a positive slippage – also known as no slippage – is when you want to purchase Dogecoin at $0.07, but you place an order, and once it has been completed, the price clocks in at $0.066.
In the end, it might be highly frustrating, or it can feel invigorating to get a better price when you are buying or selling.
Fortunately, there are several ways you can avoid crypto slippage when you are trading tokens.
One of the best strategies to employ is signing up for Bitbuy Private Wealth to obtain a personal account manager dedicated to your investing needs. This personalized touch to crypto investing offers the best rate on hundreds of coins, early access to approved coins that will arrive on the Bitbuy platform, and an easy connection to live traders. Private Wealth also offers high lliquiditut and access to set limit order via Bitbuy’s institutional grade liquidity providers.
Remember, these are fast brokers who utilize a wide range of charting and investment tools, such as limit buys or sells and stop-orders. But the expert team at Bitbuy Private Wealth avoids slippage thanks to easy access to a live order book with enormous liquidity and tight spreads. Clients are always provided with a quote for a cryptocurrency that they can accept or reject.
The more you acclimate to the financial markets and the more you become accustomed to crypto trading, the better the odds of avoiding slippage or, at the very least, benefiting from it.
Believe it or not, slippage is not a new phenomenon in the world of trading. Slippage has been around for many years, as it can be found in stocks and commodities when there is a high volume of volatility and liquidity. If you traded during the meme frenzy in 2021, you most likely discovered the share price of AMC or GameStop changing rapidly in seconds, making it difficult to get in or get out at the right price.
So, understanding the fundamental question of “how does slippage work in crypto?” can be of tremendous importance in the world of protocols and virtual currencies. You do not want to get caught below a price when you are selling or above a price when you are buying.