Experts highlight the need for transaction cost analysis in crypto to address hidden trading costs like slippage and fees.
The crypto market for Bitcoin and Ethereum lacks a systematic metric for execution quality, according to an opinion piece by Arthur Azizov on CoinTelegraph. Transaction cost analysis (TCA), a standard tool in equity trading, helps measure hidden costs and minimize price differences, but it is not widely adopted in crypto.
In crypto transactions, costs such as slippage occur when the final price deviates from the expected one due to market volatility. For instance, an investor aiming to buy Bitcoin at $90,000 might end up paying $90,900, resulting in a 1% slippage that erodes potential profits.
Challenges in Crypto Trading
Cryptocurrency prices are highly volatile and trade around the clock, making it difficult to predict execution costs accurately. Low liquidity and fragmentation across multiple exchanges exacerbate slippage, as some platforms may experience outages or limited availability.
Additional costs in crypto include fees and order routing, which are often opaque and hard to calculate manually. Unlike equity markets with centralized data sources, crypto's decentralized nature fragments trading activity, complicating reliable TCA.
The absence of regulation and a universal definition of best execution in crypto means portfolio performance depends on factors like trade speed and exchange health, rather than investor strategy.
Regulators are addressing this gap; for example, the European Securities and Markets Authority updated standards in 2025 to include crypto under best execution rules. This development encourages the adoption of TCA to enhance transparency and efficiency in crypto markets.
Advancements in cloud computing and machine learning now enable easier data aggregation for TCA, allowing traders to reduce costs and increase liquidity. As a result, trading volumes could shift to exchanges offering better conditions, fostering competition.
