<aside> ⚠️ The slippage tolerance level at Sinbad is set at 1%.
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Slippage is when the price of an order executes at a higher or lower price than you expected. Due to the volatility of cryptocurrency, the price of an asset can fluctuate often depending on trade volume and activity. If the bid-ask spread on the exchange “slips” more than 1%, then your order would be canceled.
To fully understand slippage, it's essential to understand the bid-ask spread. This spread represents the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). The bid-ask spread is influenced by factors such as market liquidity and trading volume. More liquid assets, like Bitcoin, typically have a smaller spread due to a higher volume of orders in the market.
For example, if your ETH buy executes immediately at $1800 and the current market price is $1860, but the price goes down to $1841.40, this is slippage and you’ll collect more ETH. In this example, the slippage percentage is 1% and your order would still execute.
If you were to trade BTC for ETH and the exchange rate is 1 BTC = 10 ETH (while the cash value of BTC is $1000 and ETH is $75), and the exchange rate suddenly changes to 1 BTC = 9 ETH, then your trade would be canceled. In this example, the slippage rate is more than 10%.
Slippage is caused by the amount of liquidity, which is how quickly you can buy and sell an asset without impacting the price. So if there is low liquidity or low trading activity in the market for a specific asset, then the slippage percentage is higher.
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</aside>