Bid-Ask Spread

The distinction between an order book’s highest bid price and lowest ask price is known as the bid-ask spread. The spread is frequently produced by market makers or broker liquidity providers in conventional markets. The spread in cryptocurrency markets results from the discrepancy between limit orders from buyers and sellers.

Accepting the seller’s lowest requested price is necessary if you wish to make an instant market price buy. Likewise, you’ll accept a buyer’s highest bid if you want to complete an immediate sale. The bid-ask spread is less for more liquid assets (like forex), allowing buyers and sellers to fulfill their orders without significantly changing the asset price. This is because the order book has a lot of orders. A bigger bid-ask spread will result in more significant price changes when filling orders with a high volume.

Most cryptocurrency trading takes place on exchanges, where users (traders) enter their buying and selling orders directly into the order book. In this instance, the exchange only earns money from trading fees rather than the spread.

Leave a Reply

Your email address will not be published. Required fields are marked *

© WazirX. All rights reserved

Scroll to Top