What is Bid-Ask Spread?
Let's find out Bid-Ask Spread meaning, definition in crypto, what is Bid-Ask Spread, and all other detailed facts.
A bid-ask spread defines the difference between the highest price that a buyer would be willing to pay for an asset on sale and the lowest price that a seller would be willing to take for it.
Price takers can buy an asset at the asking price and sell it at the bid price. Market makers, on the other hand, buy an asset at the bid price and sell it at the asking price. The bid typically represents the demand of the asset, while the ask is representative of the supply. The spread usually ends up being the transaction costs.
The bid-ask spread is used to measure market liquidity and is directly dependent on it. The more liquid an asset is, the smaller its bid-ask spread can be. The buyer and seller are obliged to purchase or sell their shares at the settled price once the order is placed. There are different types of orders that trigger different order placements.
A number of factors can be behind a high bid-ask spread. One of them is liquidity. The spread of heavily traded assets tends to be much smaller than those whose trading is more sparse. The size of the bid-ask spread can be affected by unpopular or unknown securities.