Liquidity In The Crypto Market #009

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Hello great minds,

It is a wonderful opportunity to come before you all today to discuss on an issue of great importance in the cryptospace.

I trust you are doing perfectly fine and you are enjoying your activities in the community as usual.

Without wasting much of our time, join me as we continue our discussion on liquidity in the cryptospace.

We ended our last discussion on the factors contributing to slippage in the cryptomarket and we shall continue our discussion today.

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FACTORS CONTRIBUTING TO SLIPPAGE IN THE CRYPTOMARKET

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There are several factors affecting slippage in the cryptomarket and some of them are:

• NEWS AND EVENT:

One aspect of slippage is that it is necessary not a challenge in itself, but it's occurrence is as a result of rapid price movements and inefficiencies in the market.

Slippage in itself can occur in both bullish and bearish market, however, it occurs during a period uncertainties and here the impact of news is highly recognized.

The impact of news on the cryptomarket can be categorized into two which is the sentimental and the fundamental news.

The sentimental news are known to be news that have effect on the market due to the emotions of traders.

For example, when there is a rumour of a popular exchange getting hacked, this can pressure so many traders if not all, to sell off their assets in that exchange, thus resulting to slippage as they attempt to exit their orders at unfavourable price.

The fundamental news on the other hand can be explained to be the information that has a direct effect on the underlying technology, regulation and adoption of cryptocurrency.

This kind of news often has great impact on the market, for example when the regulatory bodies put a ban on a particular asset, this will move every investor in that asset to sell off, and this will likely result in slippage in the market.

Explained below are ways in which news and events affect slippage in the market.

INFORMATION ASSYMETRY

Information assymetry is one major way in which news and events affect slippage in the market.

Yes, information spread very rapidly but all users don't receive them at the same time.

Individuals who receive the news before others can easily take good advantage of the impact of the news, whereas those who receive such information late will suffer the consequences which in most cases, slippage is among.

LIQUIDITY ISSUES

Recall that we explained that liquidity has Impact on slippage.

When a big news is released, individuals rush to take advantage by either buying or selling, and when the pressure is much, liquidity could dry up.

This lack of liquidity can cause slippage as large orders can cause noticeable price swing within a short period of time.

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CONCLUSION

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We have discussed some points on how news affect slippage in the cryptomarket.

As we continue our conversation, we shall learn more about slippage in the cryptomarket.