How to trade DeFi tokens when Ethereum gas prices spike

Posted September 1, 2020 by Matt Taylor

Create your first limit order on Matcha for free today!

Over the past few months, Ethereum’s gas costs have risen dramatically, which has resulted in extremely high transaction costs and difficulty for DeFi users to get the prices they want when trading. We have been aware of this issue for quite some time and have designed Matcha to give traders the tools they need to navigate these high fee environments. In this post, we cover how to create free limit orders and how we transparently display fees so you know exactly the price you’re paying on each trade.

How to easily create limit orders

Before diving into how to set limit orders on Matcha, it’s important to understand the difference between a regular market order vs a limit order. A market order is used when a trader wants to buy or sell a token at the current available price determined by the market. A limit order is used when a trader wants to buy or sell a token at a specific price.

Limit orders are extremely useful when gas costs are high because traders can ensure that they receive the exact amount of tokens at their desired price without having to spend money on fees. Often times, market orders will fail because traders are not setting their fees high enough to be confirmed on-chain. Every time the order fails, they lose the amount they paid for the fee. On Matcha, all traders can set limit orders for free and can sleep soundly while they wait for their orders to be filled at their target price.

Unlike other decentralized exchanges (DEXs) that operate solely on-chain like Uniswap, Curve, Kyber, etc. Matcha does not store orders on the blockchain. Instead, orders are stored off-chain via 0x protocol, and only move on-chain to complete the trade. The maker of orders never pays fees, only the taker. This unique feature allows Matcha to offer free limit orders while other DEXs can’t.

Creating a limit order on Matcha is simple. Just select a market, click the 3 dots in the top right corner of the trade module, and click “Limit Order”. From there, you can input the price you want to buy a token at and when you’d like the order to expire if hasn’t been filled. You can set limit orders to expire in 10 minutes, 1 hour (default), 24 hours, 3 days, or 7 days.

Note that Matcha limit orders only fill at the exact Limit Price you specify (not above or below) and orders will remain open until 100% filled or until they reach expiration. Also, limit orders are not currently available on ETH markets. However, they are available on ERC-20 token markets, including WETH markets and you can easily convert ETH to WETH.

Filling limit orders on Matcha is different from centralized exchanges, so it is a good idea to learn about the scenarios of why your limit order may not be filled as expected. Some common reasons:

  1. There is insufficient volume. Your order will only fill if there is enough liquidity to meet its requirements (number of tokens and price). Please note that the token price displayed on Matcha is the last trade price and not the price at which tokens are currently available. This situation occurs most frequently with large orders for tokens with less liquidity.
  2. The limit price hasn't been reached. Your order will remain open until another trader is willing to accept your order's requirements (number of tokens and price).
  3. You do not have enough tokens in your wallet to complete the trade. For example, if you created a limit order for 5 ETH and you have less than 5 ETH in your wallet when your limit order is triggered, the transaction will not complete.
  4. Your order was too small. Smaller limit orders can be less attractive for takers, including arbitrage bots, especially if they are making larger trades since all transactions carry an Ethereum gas fee + 0x protocol fee.
  5. Your order wasn't profitable enough for an arbitrage bot to fill. Arbitrage bots account for a good portion of limit order volume. If your order isn't worthwhile for bots to fill after factoring in the fees, they won't fill the order. This is especially true when Ethereum gas costs spike.

Transparent pricing

Other exchanges are not always transparent in disclosing all the fees charged for each trade. Matcha will always display a comprehensive fee breakdown in the review order prompt before a trade is executed. See a comparison below with Uniswap.

We are always looking for ways to improve the DEX trading experience, reach out to us through our Help button or on Twitter if you have any features requests!

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