What Is ‘Slippage’ in Cryptocurrency Arbitrage and How Does It Affect Profitability?

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. In cryptocurrency arbitrage, it occurs when the act of buying or selling an asset moves the price before the trade is complete, especially in markets with low liquidity.

Large orders can consume the best available prices, leading to a worse average price for the trade. This directly erodes the often-thin profit margins of an arbitrage opportunity, potentially turning a profitable trade into a losing one.