Slippage in cryptocurrency trading refers to the difference between the price you expect to pay for a trade and the actual price at which the trade executes. It occurs when market conditions change between the moment you submit a transaction and when it is confirmed on the blockchain.
Slippage can work in both directions — you might end up paying more (negative slippage) or less (positive slippage) than anticipated. However, traders are typically concerned about negative slippage that costs them money.
The main causes of slippage include:
- Low liquidity — pools or order books with thin liquidity cannot absorb large trades without moving the price
- High volatility — rapid price movements during bull or bear markets change the price before your trade confirms
- Large trade size — bigger trades have more impact on the available liquidity, causing greater price deviation
- Network congestion — slow transaction confirmation times increase the window for price changes
On decentralized exchanges powered by AMMs, you can set a slippage tolerance — the maximum percentage of price deviation you are willing to accept. Setting it too low may cause your transaction to fail, while setting it too high leaves you vulnerable to front-running bots.
To minimize slippage, trade on platforms with deep liquidity, break large orders into smaller chunks, avoid trading during extreme volatility, and use limit orders when available on exchanges like Kraken or Bybit.