What is slippage in crypto?

Imagine placing a trade expecting to pay a certain price, only to find that the trade executes at a different price. This is known as ‘slippage’ and is a relatively common phenomenon in crypto markets. However, understanding what slippage is and why it happens is key to preventing it from impacting your trading. 

In this article, we’ll explain what slippage in crypto means in simple terms and why it happens. 

Slippage refers to the difference between the expected price of a cryptocurrency trade and the actual price at which it is executed. This typically occurs in fast-moving or illiquid markets, where prices can change rapidly before an order is filled.

Crypto traders often say they’ve been “slipped” when their trade is executed at a significantly less favorable price than anticipated, resulting in a higher cost for buyers or lower returns for sellers.

It’s important to note that slippage isn’t inherently bad, it merely comes with the territory of trading in financial markets. While typically it has a negative impact on your average fill price, it can on occasion work in your favour. This is discussed in more detail below. 

Think of it like buying an item at a store: you see a price tag of $10, but by the time you reach the checkout, the price has changed to $12. In crypto, you might attempt to buy 1 Ethereum (ETH) at $2,000, but due to market moves or a rapid change in the order book, you end up paying $2,020. The $20 difference is slippage. 

Slippage is usually expressed as a percentage; in this example, it’s 1% above the expected price. 

Slippage occurs when executing market orders (active orders, which take advantage of resting orders in the order book, matched with the best available prices) because the market may move by the time the order completes.

Not all slippage works against you. Sometimes it can actually help. There are two main types of slippage in crypto trading: positive slippage and negative slippage.

• Positive slippage: This occurs when you get a better price than expected. For example, if you place a buy order expecting to pay $50 per coin, but it executes at $48, you’ve experienced positive slippage. In this case, the market price moved in your favor – you spent less than anticipated (or if selling, you sold for more than expected).
   
• Negative slippage: This is when you get a worse price than expected. Using the opposite scenario, suppose you intended to buy at $50 but the order filled at $52. That $2 higher price is negative slippage – you paid more than you wanted (or if selling, you received less than expected). Negative slippage effectively costs you money compared to the initial price you saw.

Which type you get depends on how the market price moves while your trade is being processed. The goal, of course, is to limit negative slippage as much as possible and even potentially benefit from positive slippage when the market allows. Next, we’ll explore why these price differences happen by looking at the causes of slippage.

Certain market conditions may make the possibility of incurring slippage more likely, such as volatility, liquidity, order size and execution speed. 

• Market volatility: Cryptocurrencies are known for rapid price swings. When the market is highly volatile, prices can change in the blink of an eye. If you place a market order during a sudden spike or drop, the price at execution might differ from the price just seconds before. For example, a big news announcement or tweet can acutely increase volatility, leading to slippage as your order executes at the new price. In short, the faster and more unpredictably prices move, the more likely you’ll encounter slippage.
   
• Low liquidity: Liquidity refers to how easily an asset can be bought or sold without affecting its price. In a highly liquid market, there are plenty of buyers and sellers at various price levels, so large orders can be filled near the expected price. In a low-liquidity environment (for instance, a lesser-known altcoin or a trading pair with few active participants), there may not be enough orders near your desired price. Your order then “eats through” the order book, matching with progressively worse prices until it’s filled.
   
• Large order size: The size of your trade matters. Even in a moderately liquid market, if you place a very large buy or sell order, it might not be filled at a single price. Let’s say you want to buy a huge amount of a cryptocurrency – you might buy all the coins available at $100, and then the order continues to fill at $101, $102, and so on, because you exhausted the cheaper asks. By the end, your average purchase price is higher than $100. The bigger the order relative to the market’s liquidity, the more slippage can occur. This is why big traders often split their orders into smaller chunks to avoid heavy slippage.
   
• Slow execution or network delays: Sometimes the cause of slippage is simply that your trade didn’t execute instantly. On traditional centralized trading platforms, this could be due to latency or the time it takes to match orders. In the case of decentralized exchanges (DEXs) that run on blockchain networks, network congestion and block confirmation times can introduce delays. If the blockchain is busy (for example, many people trading at once or high traffic on Ethereum), your swap might sit pending for several seconds or minutes. During this delay, market prices can fluctuate. As a result, by the time your transaction is confirmed, the final execution price may differ from the one you initially saw, potentially affecting the value you receive.

All these factors revolve around one central concept: price change during order execution. High volatility makes prices a moving target, low liquidity means not enough liquidity at a fixed price, large orders push into less favorable prices, and slow execution gives more time for the price to shift. Often, slippage is a combination of these factors. 

Next, we’ll discuss how slippage plays out on different types of crypto exchanges (centralized versus decentralized) as each handles trades in distinct ways.

Slippage can occur on both centralized (CEXs) and decentralized trading platforms (DEXs), but the causes and controls differ.

Centralized trading platforms use order books to match buyers and sellers. Slippage happens when your market order is too large to fill at a single price, causing it to be matched across multiple levels, especially in low-liquidity markets. CEXs don’t offer slippage tolerance settings, but traders can limit slippage by using limit orders. Any slippage incurred is a result of market depth and spread, not charged by the exchange itself.

Decentralized trading platforms, like Uniswap or SushiSwap, use Automated Market Makers (AMMs) and liquidity pools. Prices shift based on the pool's token ratios. Large trades or shallow pools cause greater slippage. Since trades are on-chain, network delays can also affect pricing. Unlike CEXs, DEXs let users set a slippage tolerance, which cancels trades if price movement exceeds a set threshold. In DEXs, slippage typically benefits liquidity providers.

In summary:

• On CEXs, slippage stems from thin order books and is controlled with order types.
   
• On DEXs, it's influenced by liquidity pool depth, trade size, and blockchain speed, with tolerance settings offering added control.

Slippage tolerance is a setting —primarily on decentralized exchanges—that lets you define the maximum price deviation you're willing to accept during a trade. If the market price moves beyond your set percentage (e.g., 1%), the trade will fail. This protects you from severe negative slippage, especially in volatile or low-liquidity conditions.

Setting slippage tolerance is a balancing act:

• Too low (e.g., 0.1%) – Trade may fail due to minor price fluctuations.
   
• Too high (e.g., 3%+) – Trade likely executes but at a worse price, risking front-running.

Typical ranges:

• Stable, high-liquidity assets: 0.1%–0.5%
   
• Volatile or low-liquidity tokens: 1%–3%+

Many decentralized crypto platforms default to 0.5%–1% slippage tolerance. A good rule: use the lowest slippage setting that still allows your trade to execute reliably. As you gain experience, you’ll better judge how to adjust slippage tolerance for different market conditions and crypto assets.

Slippage measures how far the executed price of a trade deviates from the expected price, expressed as a percentage. The formula is:

Slippage (%) = ((Executed Price - Expected Price) / Expected Price) × 100

• Negative slippage: Expected to buy at $100, but paid $105 → Slippage = 5%
   
• Positive slippage: Expected to sell at $50, but received $52 → Slippage = 4%
   

On DEXs, slippage can also be calculated by the difference in tokens received. For instance, if you expect 100 tokens for 1 ETH but receive only 95, you’ve experienced 5% slippage.

Most crypto trading platforms don’t show exact slippage post-trade, so calculating it manually can help you track performance. If you frequently see high slippage, it may be time to adjust your trading strategy or settings.

While you can't avoid slippage entirely, these strategies can help reduce its impact:

• Use limit orders
  Set the exact price you're willing to buy or sell. Unlike market orders, limit orders protect you from unexpected price fills and eliminate negative slippage—especially on CEXs.
   
• Trade high-liquidity pairs at peak times
  Stick to major trading pairs with deep order books or large liquidity pools. Trade during active hours (e.g., overlapping U.S. and EU sessions) for tighter spreads and less slippage.
   
• Avoid trading during high volatility
  Skip trading during market-moving news or hype-driven surges. Volatility spikes increase slippage. Wait for price stability if possible.
   
• Split large orders/scale into trades
  Break big trades into smaller chunks. This reduces the chance of moving the market and helps achieve better average pricing.
   
• Set smart slippage tolerance
  Adjust slippage settings based on token liquidity and volatility. Start low (e.g., 0.5–1%) and increase only if needed to ensure execution without excessive loss.
   

Choose reliable platforms
Use established exchanges with strong liquidity and efficient trade execution. DEX aggregators can also reduce slippage by routing orders across multiple pools.

Now that you understand how slippage works, take control of your trades with confidence. Start your crypto trading journey with Kraken, where smart tools and real-time pricing help you stay ahead of the market.