“Insufficient Liquidity for This Trade” – What Is This Error and How to Fix It?

As someone who has embarked on this cryptocurrency journey, I can attest to the thrill and the challenges that come with it. One such challenge is the infamous “Insufficient liquidity for this trade” error, a message that has left me scratching my head more times than I’d like to admit.

As a crypto investor, navigating the world of digital currencies and exchanges isn’t always straightforward. The challenges can arise from various factors such as the specific network, platform, or cryptocurrency you opt for. For example, you might encounter situations where you’re unable to execute trades due to the exchange not supporting certain tokens – a hurdle that can be frustrating and may require switching platforms or finding alternative methods.

A scenario you might come across is often referred to as “Liquidity Insufficient for this Trade.” This issue can show up on Decentralized Exchanges (DEXs) such as PancakeSwap and Uniswap, but don’t be alarmed – even if you’re new to the world of cryptocurrency, we’ll guide you through resolving it.

What Is “Insufficient Liquidity for this Trade”?

When ‘Insufficient liquidity’ occurs in a decentralized exchange, it signifies a common issue where the necessary funds for trading aren’t readily available on that particular platform, preventing your intended trade from being executed successfully.

In case you encounter this predicament, take comfort because it’s quite typical for such trading systems to experience errors like this. Rest easy, your actions are not irreversible.

But why would this happen?

Why Does This Happen?

There are two main reasons why you might face an “Insufficient liquidity for this trade” error:

You either want to get more tokens than the size of the pool;
You did not select the right liquidity pool.

One common explanation revolves around the usage of Automated Market Maker (AMM) models by decentralized trading platforms. In simple terms, AMMs allow users to deposit their tokens to form liquidity pools. These pools facilitate trades on these exchange platforms. Each liquidity pool holds a pair of two distinct tokens or coins, such as ETH and USDT.

For example, you can trade ETH for USDT or vice versa using the ETH/USDT liquidity pool. The value of the tokens within this trading pair is established based on the quantity of cryptocurrency in the pool at a given moment.

But we think things would get clearer if we talked based on an example.

If Bob intends to exchange 7 Ether (ETH) for US Dollar Tether (USDT), but the pool he selects only has 5 ETH and 1000 USDT, it’s obvious that there isn’t enough liquidity available to finish the trade. As a result, an “insufficient liquidity” error message will appear. Furthermore, due to this lack of liquidity, the estimated price for the swap will drop significantly.

But how can you actually fix this error or ensure you do not have to deal with it?

How to Fix “Insufficient Liquidity for This Trade”

Reduce the Trade Size

A more simplified approach could be: Instead of using a large trade size, choose a smaller one that matches the amount of tokens readily available in the trading pool on your chosen decentralized exchange for swapping. Simply pick your desired tokens and make sure your transaction doesn’t surpass the current supply.

Increase the Slippage Tolerance

Users have the flexibility on decentralized platforms to customize their own desired level of slippage tolerance.

But what is slippage tolerance exactly?

As a researcher, I’d express slippage tolerance as follows: Essentially, it represents the greatest disparity in price that a trader can tolerate between the anticipated price for a transaction and the real price at which the trade gets executed.

In unpredictable market conditions, an asset’s value can fluctuate rapidly, potentially resulting in a trade price that differs from the initial expected price. By establishing a tolerance for slippage, traders are able to control the degree of variation they find acceptable. This allows their trades to align with their strategic objectives, preventing them from being filled at unfavorable prices.

In the world of Decentralized Finance (DeFi), having a high tolerance for slippage is a crucial setting for traders dealing with Automated Market Makers (AMMs) on platforms like Uniswap or PancakeSwap. If the market fluctuates rapidly and the price shifts beyond the trader’s predefined tolerance level for slippage, the system will automatically halt the transaction to prevent potential, unforeseen losses from occurring.

In my analysis, maintaining a moderate level of tolerance can be beneficial during periods of market volatility as it allows for successful trades. However, a higher tolerance might potentially lead to unfavorable price outcomes due to increased risk. Conversely, a lower tolerance could cause trades to fall through if the market experiences excessive fluctuations. Thus, finding the right balance is crucial in navigating the complexities of trading.

consider expanding your price slippage tolerance. However, it’s crucial to assess the potential risks involved in this adjustment. A larger slippage tolerance or different slippage settings may lead to reduced profitability, despite preventing “insufficient liquidity” issues.

Check If You’re Trading the Correct Token

When it comes to choosing a token, we’re not implying that you made a mistake. What we want to emphasize is that many (if not most) exchanges don’t carry every single token available on the market. To ensure a smooth transaction, it’s important to verify which cryptocurrencies are compatible with the decentralized exchange platform you select.

For example, Uniswap operates using Ethereum, meaning it facilitates ERC-20 tokens and offers liquidity pools for each one by enabling liquidity providers to add funds to these pools. On the other hand, PancakeSwap functions with Binance Smart Chain, resulting in its support of BEP-20 tokens.

To successfully trade specific BEP-20 tokens on Uniswap or ERC-20 tokens on PancakeSwap, it’s crucial to select a cryptocurrency that is compatible with the Decentralized Exchange (DEX) and included in at least one trading pair within the platform. This will ensure a smooth trading experience.

Trade Other Tokens

Should the liquidity for a particular token or coin be scant at a given point in time, exploring alternative trading opportunities becomes quite handy – especially when you’re keen on making trades exactly during that period.

Look for another cryptocurrency that fits most of your criteria and try to trade that one instead.

Once the issue has been addressed, whether resolved by the swap or liquidity providers, I will proceed with swapping the token I originally intended.

FAQ

How to solve “Insufficient liquidity for this trade”?

There are more ways to solve this problem. You can lower your input, change the slippage settings, try to trade other tokens, choose other decentralized exchanges, or even look for another liquidity pool.

What is the meaning of insufficient liquidity?

Typically, this message signifies that the selected liquidity pool lacks sufficient tokens to complete your requested transaction or swap. This may lead to larger than expected changes in prices as a result of the discrepancy between the amount of tokens you supplied and the amount of available tokens.

What is “No liquidity for swaps”?

In simpler terms, when you encounter an “insufficient liquidity for this trade” error, it essentially means that the trading pool you selected does not have enough of the specific tokens you’re trying to acquire. This is because no liquidity provider is prepared to exchange the cryptocurrency you’re offering for the token you want at this time.

What does “Not enough liquidity” mean on Coinbase?

Since Coinbase functions as a centralized exchange, the issue you’re experiencing isn’t related to the platform itself but rather the Coinbase Wallet. However, it seems that Coinbase’s Support team has indicated that this matter is beyond their control, as it pertains to the liquidity of the Decentralized Exchange (DEX) involved.

What is slippage tolerance on PancakeSwap?

On PancakeSwap, slippage tolerance represents the greatest proportion of price change a trader accepts while their trade is being processed. Given the rapid price fluctuations in the cryptocurrency market due to volatility, this tolerance allows transactions to complete despite minor price adjustments.

In simpler terms, setting the slippage tolerance to 1% means a trade can only be executed if the price change between placing and filling the order stays within that percentage. If the market price fluctuates significantly past this threshold, the trade won’t go through to prevent potential surprises in losses.

In Conclusion

Engaging in cryptocurrency trading comes with its advantages, obstacles, potential dangers, prerequisites, hidden rewards, and occasional issues such as “insufficient market depth for this transaction.” Every trading experience provides valuable lessons, even those instances where you’re unable to execute a trade due to insufficient liquidity.

In case you encounter such a scenario, consider these options: boost your tolerance for slippage, decrease the quantity of your trades, opt for swapping a different token, or switch to a different trading platform altogether. It’s also important to verify that you are indeed dealing with the correct token.

2024-09-25 17:58