A founder argues that the crypto market urgently needs transaction cost analysis (TCA) tools, common in traditional finance, to illuminate hidden execution costs like slippage. He states current opacity hurts investor trust, but regulatory steps and technological advancements could pave the way for greater transparency and market efficiency.
Transaction cost analysis has long been a key tool for equity traders to see hidden costs and minimize price differences. As crypto matures, it begins to function like other tradable instruments, yet execution costs are not systematically analyzed.
This opacity demands the crypto industry adopt transaction cost analysis before it erodes market trust. To an untrained eye, major crypto pairs can seem liquid with deep order books and competitive quoted spreads.
The final execution price can still deviate from the expected one due to slippage, however. For instance, an investor intending to buy 1 Bitcoin for $90,000 might pay $90,900 due to market volatility, a $900 or 1% cost.
In equity markets, these costs are measured precisely with TCA and best execution. For crypto, the real price of entry or exit is often hard to calculate manually, but TCA can allow traders to break down the true cost of execution.
Cryptocurrency prices are highly volatile and change every millisecond, with trading happening around the clock. This significantly influences trade execution costs, as investors are sometimes not timely in purchases.
Liquidity is low and fragmentation across numerous exchanges remains high, worsening during platform outages. Some costs can be quietly included within trade prices, complicating the total consideration and making the full cost difficult to know.
A meaningful transaction cost analysis requires standardized data, typically available from centralized sources in traditional markets. The decentralized nature of crypto leads to fragmented trading activity across many exchanges, complicating data aggregation.
The market also lacks regulation and a universal definition of TCA or best execution. Portfolio performance thereby depends heavily on external factors like trade speed or venue health, rather than an asset manager’s capabilities.
Regulators are beginning to recognize this execution gap. The European Securities and Markets Authority updated its standards in 2025 to extend best execution beyond equities to include crypto.
Regularization does not introduce TCA per se or prescribe specific performance indicators, but it is an important precedent. Execution transparency becomes more mandatory for digital assets, even if regularization alone cannot solve invisible trading costs.
The dilemma of scattered data and lack of standardization is now being solved with cloud computing and big data analysis. Powered by machine learning, platforms can conduct transaction cost analysis across venues and identify previously inaccessible patterns.
The massive use of TCA would help traders reduce costs and increase liquidity. Trading volume would flow to venues with better conditions, stimulating competition between exchanges and assets.
