Creating learnedness of price slippage on Uniswap Exchange

If you are a crypto enthusiast then I am pretty sure that you are well familiar with the prime facilities and the objective of the Uniswap Wallet exchange. Falling into the category of DeFi, it is a decentralized cryptocurrency exchange which uses smart contracts for facilitating crypto trades.

Swapping is highly supported by this exchange and a lot of crypto investors are engaged in this activity, but having a clear understanding of the essential factors that hold the potential to impact your decision or trade is also important. Thus, to provide you a brief information about the fundamental and crucial aspects we have crafted this read.

Yeah!! Through this read, we are going to hold a precise discussion on Price Slippage, what it is, and why is it considered an important factor.

Getting an idea of Price Slippage

Needless to mention, the crypto market is highly volatile and even a slight change in the market fluctuations can turn around the table. Whenever we think of any trade or investment activity, price is one of the most crucial element that holds the power of either adding worth to your investment or bringing loss to your home. Being a virtual world, it becomes hard to predict pricing of any investment down the road.

Price Slippage is somewhere stuck between what we expect and what we receive. The change in the price of a token resulting because of market movements/fluctuations is referred to as “Price Slippage”.

Didn’t get clarity about this concept?

Okay, so in a layman’s language, Price Slippage is the difference between the two components i.e. what price you were expecting and what price you receive in real after the swap is completed through Uniswap Exchange.

To put it numerically,

Price Slippage = Price that investors were expecting – Price that they actually receive

Thus, through this numerical expression, you might now be able to understand what it is.

The determinants of the minimum amount that you will receive

Whilst swapping on the Uniswap Exchange, predictions are made relating to the basic/minimum amount that the investors will be able to secure. This complete process of forecasting the minimum amount is based on two components and they are:

The relationship between the token price and the slippage setting

While performing the swap action, Uniswap Exchange receives the offered token price that is determined by the auto-slippage setting. The auto-slippage percentage in general ranges between 0.1%-0.5%. This percentage is determined by undertaking two factors i.e. the network fees and the size of the swap.

The level of the slippage setting impacts the complete trade and comes up with two conclusions.

If it is set too low: This will lead to transaction failure and a network fee will get charged even before the activity is performed.

If it is set too high: This will result you in getting fewer tokens than expected.

Further, you can check the auto-slippage settings from the “Settings” menu after getting into your Uniswap Exchange account.

Closing Lines

To conclude, through the information provided in the above read, you might have got a brief idea of how price slippage takes place on the Uniswap Exchange. Investors should also remember that price slippage and price impact are poles apart. The major point of difference between the both is the factor due to which a token price gets changed. Under this concept, the difference occurs because of the total market movements but under price impact, the difference in token price takes place because of the investor’s trade activity.