Bid-ask spread
A bid-ask spread is the difference between the highest price buyers are willing to pay and the lowest price sellers are willing to accept for a cryptocurrency. This difference is a cost when you buy or sell.
What is a bid-ask spread?
The bid is the highest price a buyer is willing to pay. The ask is the lowest price a seller is willing to accept. The bid-ask spread is the difference between those two prices.
A small spread usually means lower trading costs. A large spread makes buying and then selling right away more expensive. Separate transaction fees may add to those costs.
An example of a bid-ask spread
Suppose buyers are willing to pay up to €29,950 for Bitcoin. Sellers want at least €30,000 to sell Bitcoin. The bid-ask spread is €50.
If you buy for €30,000 and immediately sell for €29,950, you lose €50 per Bitcoin because of the spread. This example shows why the difference between the bid and ask prices matters.
Why does the bid-ask spread matter in crypto?
The spread gives you an idea of the cost of a trade. The spread is often smaller for crypto that’s traded frequently. It can be larger for less popular crypto.
In news about rapid price movements or turmoil in the crypto market, you may read that spreads are widening. In that case, buying may cost more and selling may bring in less than you expect. This can lead to slippage.
A wide spread often points to less trading activity or sharp price movements. It doesn’t automatically predict whether the price of a crypto will rise or fall next.
