Slippage

Slippage is the difference between the price a trader expects when placing an order and the price at which the trade actually executes. It occurs because markets move between order submission and execution, and because large orders consume multiple levels of an order book. A market order for 100 bitcoin on a thin exchange might fill at an average price 0.5 percent worse than the quote the trader saw.

Why it matters

Slippage is a real trading cost that never appears on a fee schedule. It scales with order size and shrinks with market depth, which makes it effectively a tax on illiquidity. Professional traders manage it by splitting large orders into smaller pieces, using limit orders that cap the acceptable price, or routing blocks through over-the-counter desks that quote a single price for the entire trade. For anyone comparing venues, realized slippage is often a better measure of true cost than the advertised commission.

In the gold vs bitcoin debate

Gold trades in one of the deepest markets in the world, with London over-the-counter clearing alone settling tens of billions of dollars in metal daily, so institutional gold trades suffer little slippage. Bitcoin liquidity is fragmented across many exchanges and deepened considerably after United States spot ETFs launched in January 2024, but a large market order can still move a thin book. That is one reason most sizable bitcoin trades are executed over the counter rather than on public order books.