You have thoughtfully planned your budget and investments, you are ready for a reasonable trade, and there is only one simple thing left: to buy assets. However, is it really simple? Slippage is exactly the thing that might turn this easy and potentially profitable thing into a money waste.
Crypto slippage is the difference between the expected order price and the total one. The main reason for that is a price change when the asset is traded. Occasionally, the effect might be beneficial, but it is usually not. In most cases, it will make a negative impact on the price, and you will end up spending more than you expected.
Abex is developing its OTC services to make the future buying process smooth and worry-free. It will help you avoid slippage and save your budget.
How Does Slippage Occur?
Imagine you’ve decided to buy a certain number of digital assets and found them for a reasonable price. However, the seller doesn’t have enough of them, so you need to search for another one to buy the amount left. You find the seller offering them, but the price is 20% higher. In the end, you get the assets at a more expensive cost than the initial one.
Demand creates its own supply, and it also refers to slippage. It is common due to the high volume of orders placed simultaneously, causing rapid movement (high volatility) in the price of the cryptocurrency. Moving through the order book takes time, so there might be a difference between the prices at the moments of placing an order and finding a matching offer.
Latency issues are another obstacle on the way to a successful trade. They occur in some exchanges with gaps in the software, allowing other trades to slip in ahead of yours. If high volatility takes place and a high order volume overwhelms exchanges, they will not be able to fulfill the orders without significant slippage.
What Causes Slippage?
You can face slippage in any market. However, there is a higher possibility of seeing it in markets where the low liquidity is combined with high volatility. As liquidity decreases, slippage usually increases, so it is incredibly common for the cryptocurrency market.
The slippage driving force is a significant event like a new coin launch or a major exchange hack. In other words, anything that makes many traders enter or exit the market at once. As they simultaneously make orders, the entire crypto market rises, causing slippage and, therefore, losses.
How to Avoid Slippage When Making Cryptocurrency Orders?
Did you begin to doubt buying or selling large amounts of assets due to the possible slippage occurrence? You shouldn’t, as there is a way to avoid it. The best and most efficient one is to use OTC trading services. You don’t even need to search for long! Abex is aimed to provide such services, ensuring you pay the amount you see on the screen.
How do they do that? Are there any pitfalls? None! It’s just the result of trusted relationships with other OTC trading institutions. It allows us to access large amounts of trade liquidity without disturbing the exchange markets. In the end, you will avoid slippage and make a great investment.
Do you have any questions left? Contact us and make your digital assets trading a pleasure!