Domestic virtual asset exchanges have begun a market-share race with a "no-fee" policy. But analysts note that even if fees are waived, the actual transaction expense can rise if the trading volume is thin and a buy or sell is not executed at the desired price.
On the 3rd, according to the virtual asset industry, Coinone and DigitalX (formerly Korbit) recently ran a fee-free promotion on the won market.
Fees may be free, but virtual assets with low trading volume can end up costing more. If a user buys 20 million won worth of virtual assets with a 0.05% fee, a 100,000 won expense occurs. Even if the user saves 10,000 won on a fee-free exchange, if the order is filled 0.1% above the quote because of a thin order book, the user pays 200,000 won in excess expense and can ultimately take a loss.
Virtual assets with little liquidity can have thin order books because there are few resting orders at each quote. In this case, placing an order above a certain size at once raises the likelihood of "slippage." Slippage means the gap between the investor's intended price and the actual execution price due to insufficient depth in the order book.
Slippage occurs when buying a large amount of altcoins (Altcoin, all virtual assets except bitcoin) at market price in illiquid conditions. For example, if a coin quoted at 100 won is bought at market for 10 million won and there are only a few hundred thousand won worth of sell orders at 100 won, the average execution price rises much higher.
In April 2021, Arowana Token (ARW), which was listed on Bithumb, once surged from 50 won to 53,800 won in about 30 minutes as buying swarmed amid a lack of liquidity. With normal price-discovery functions not working, a small amount of funds sent quotes soaring, and individual investors who bought near the top suffered heavy losses.