If you are looking for the best automated crypto trading platform there are a few key considerations which should look out for:
Market depth
The depth of the particular market you want to trade into – the available liquidity – will determine any slippage in the price as you execute an order. You can use crypto price aggregators like Coinmarketcap or Coingecko to get a sense of the market depth available for swapping a particular coin.
The Market Depth metric is often described as the volume required to move the price +/-2%. The higher that volume the greater confidence you can have that your trade won’t move the price away from your desired entry or exit.
If you are concerned about moving the market and price slippage on a DEX you can consider breaking your trades into smaller chunks, waiting for the liquidity pools to rebalance. This, however, needs to be balanced against paying higher fees for more transactions.
Fees
Decentralised exchanges are blockchain-based with all transactions committed to the chain paid for by fees calculated in relation to the specifics of the consensus mechanism and network congestion. Ethereum is by far the most popular chain for DEFI but it has become a victim of its own success struggling to scale with fees rising to exorbitant levels. If you are considering using a DEX you need to incorporate fee comparison into your decision-making process.
Ethereum’s scaling issues have become an opportunity for other chains to compete. Solana, Avalanche and Fantom have emerged with alternative consensus mechanisms and lower fees, but have their own disadvantages either in terms of smaller ecosystem, lack of decentralisation or reliability.
Those DEX that are built on layer 2 Ethereum applications – like Metis or Arbitrum – are popular because of the cheaper fees and ease of bridging from Ethereum though there are some significant drawbacks.
- Layer applications aren’t interoperable
- They may not offer significant liquidity
- Onboarding/confirmation times can be significant
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