What Is Slippage in Crypto? Causes and How to Avoid It

Slippage is when a trade executes at a different price than expected. This can happen for different reasons, such as large trade sizes and low liquidity. For example, a trader lost about $50 million in March 2026 in a trade that experienced massive slippage.

Slippage can be positive or negative, and some amount of slippage may be unavoidable in some scenarios. Understanding the risks and best practices to avoid them can help to avoid trades that incur massive losses.

Most crypto doesn’t have fixed values, with pricing determined by the market instead. The “official” prices for an asset at any time are based on the prices at which it is trading across multiple exchanges.

As a result, it’s expected that any particular trade may deviate somewhat from the official price. With Automated Market Makers (AMMs), users trade directly with a liquidity pool, which calculates prices based on its pricing algorithm, which considers the quantities of the two tokens of the trading pair in the pool. The more of a particular token that a user removes from a pool in a transaction, the more expensive it is to do so.

Slippage can be caused by a variety of factors, including:

• Low Liquidity: If a liquidity pool has a small quantity of reserves, every trade has a significant impact on the token ratio in the pool. As a result, trading in a pool with low liquidity is likely to have higher price impacts and increase vulnerability to slippage.
• Large Trades: Even for a pool with significant reserves, massive trades can still significantly change the token ratio. This creates price impacts since future trades will be based on the new token ratio and priced accordingly.
• Market Volatility: If prices are moving rapidly, then any gap between a trade being initiated and completed may introduce price differences. At times of high volatility, prices can change significantly within the space of a single block, dramatically shortening the lifetime of a particular price quote.
• MEV and Sandwich Attacks: Maximal Extractable Value (MEV) refers to the ability to make profits by reordering, inserting, or censoring transactions. Sandwich attacks can create slippage by performing transactions before and after a scheduled trade to make profits from the price impacts of the original and attacker’s trades.
• Network Congestion: When the network is congested, trade transactions may sit in mempools for a while before being included in a block and executed. If other trades are executed while a trade is sitting in the mempool, then the price impacts of these trades can cause the actual price to vary from the initial quote.

Price impact and slippage are related but distinct terms that are often used interchangeably. Price impact is the amount by which a trade’s price may differ from the official price based on the details of the trade. This is based on the AMM’s price calculation and can be somewhat predicted in advance.

Slippage, on the other hand, is unpredictable and driven by external factors. A price quote may be accurate at the time that it’s made, but other trades performed in the interval can change the token ratio within the pool. The difference between the price calculations performed by the AMM at the time of the quote and at the time that the trade is executed is the slippage.

For example, take the $50 million trade mentioned earlier. The vast majority of the losses were caused by the price impacts of the trade, which involved attempting to trade $50 million worth of tokens in a pool with only about $73,000 in total liquidity. The pool simply didn’t have the level of reserves needed to make the trade.

It’s possible that slippage also played a role, but it would be a minor one. Since the trade was over $49 million more than the total value of the pool, slight price deviations due to other trades performed between the quote and the trade execution would be negligible.

Slippage is caused by external factors, but the risk can be mitigated. Best practices include:

• Use High-Liquidity Pools: Slippage occurs when price impacts change the price between the time of the quote and the trade execution. High-liquidity pools are less likely to have significant price changes, reducing the risk of slippage.
• Break Up Large Trades: Larger trades are more vulnerable to slippage because they make significant changes to the pool’s token ratio and have large price impacts. Breaking these trades into smaller chunks reduces the risk of massive slippage on a trade and makes it a worse target for MEV and sandwich attacks.
• Use DEX Aggregators: DEX aggregators, such as Paraswap and 1inch, can be used to find optimal routes for trades. This reduces the risk that a trade will end up in a pool with limited liquidity and high slippage risks.
• Trade During Low Volatility: Markets can experience high volatility due to current events, press releases, and other factors. Avoiding trading during these times reduces the risk of slippage.
• Use Slippage Controls: Slippage is most dangerous when trades are permitted to go through regardless of the amount of slippage. Limit orders and defined slippage tolerances can help to manage the potential for loss.

Slippage is an inherent risk of active markets where price is defined based on supply and demand. Trades performed in the window between quote generation and trade execution change the state of the market and the value of the assets in question.

This issue is exacerbated in the Web3 space, where transactions sit in public mempools before being included in a block and officially executed. This allows other transactions to be executed after the trade is approved by the user and introduces the risk of MEV and sandwich attacks.

While some slippage may be unavoidable in some cases, the threat can be managed. This requires taking steps to identify optimal routes for a trade and implementing controls to manage the potential for slippage.