Introduction: Insufficient liquidity for a trade can be a major issue when trading on decentralized exchanges. Without sufficient liquidity, the chances of finding counterparties willing to take part in the trade are slim. Fortunately, there are ways to mitigate this risk when using uniswap or pancakeswap. This guide breaks down everything you need to know about liquidity and how to fix insufficient liquidity issues.
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Liquidity refers to the available amount of an asset that can be traded in a market. Insufficient Liquidity for this Trade error is a common issue that occurs when there is not a sufficient quantity of the asset being purchased.
This happens when users are trying to buy low liquidity coins or tokens on decentralised exchanges. While automated market makers (AMMs) like Uniswap and Pancakeswap were created to solve liquidity issues on decentralized exchanges, they are not perfect!
Insufficient liquidity issues can occur when using decentralized exchanges like Uniswap and Pancakeswap, even though they provide traders with ways to increase liquidity.
However, insufficient liquidity can still be a limiting factor, and you should always consider the available amount of liquidity before executing any trade. Below we have outlined a few ways that you can deal with the issue of insufficient liquidity irrespective of which exchange you are trading on.
If you are willing to possibly pay a higher price, you can solve this issue by increasing the Slippage Tolerance. Slippage refers to the difference between the expected price of the trade and the price that is actually executed. So if you want to buy for 100$ and you set the slippage to 10%, you may end up receiving $90 worth of that asset.
Occasionally, it may be the case that you have to switch to an older version of the exchange that has deeper liquidity. If that is the case, simply switch from one version to another.
To limit the effect of causing a drastic change to the price of an asset, simply buy smaller amounts.
Before buying, check if the token or coin that you are trying to buy has sufficient liquidity. You can use coingecko to check liquidity for each pair.
Click on Exchanges in the menu and navigate to the exchange that you want to buy from. Below we have outlined a screenshot from the Osmosis DEX. Ideally you want to see a few tens of thousands on the +2% or -2% depth columns.
As much as we all want to use decentralized exchanges, occasionally we are forced to use centralized exchanges to satisfy our trading needs. When that's the case, we recommend using Kraken & eToro. Both are regulated by FinCEN, have been operational without hacks for over 10 years and offer a wide range of cryptocurrencies.
350+ Cryptocurrencies
Low trading fees (0.1%)
Wide Crypto Product Range
