Bid-Ask Spread Meaning

The bid-ask spread is the difference between the bid price (highest price buyers will pay) and the ask price (lowest price sellers will accept). In crypto, this spread is one of the simplest ways to describe how “expensive” it is to trade immediately. If you buy at the ask and then immediately sell at the bid, the spread is the loss you would take before fees-often treated as a baseline measure of market friction.

Spreads are usually quoted in absolute terms (e.g., $5 wide) or as a percentage of price (e.g., 0.02%). Tighter spreads generally indicate stronger liquidity and more competition among market makers. Wider spreads typically appear when liquidity is thin, volatility is elevated, or uncertainty rises (e.g., around major news, liquidation cascades, or sharp risk-off moves).

In those conditions, market makers may widen spreads to protect themselves from adverse selection-getting “picked off” by faster or better-informed traders. Spread is closely linked to order book depth. A market can show a tight top-of-book spread but still be hard to trade in size if there’s little volume behind the best bid and ask.

That’s why professional execution looks beyond the headline spread and evaluates depth, resiliency (how quickly liquidity refills after trades), and venue quality (latency, matching rules, fee structure, and the stability of posted liquidity). For traders, the spread informs order choice. Market orders typically pay the spread (and can pay additional slippage), while limit orders attempt to capture spread by posting liquidity-though at the cost of execution certainty.

For institutions, spread also helps compare venues: two exchanges may display similar mid prices, but the venue with consistently tighter spreads and deeper books tends to deliver better execution, especially during stressed markets. Finally, spreads can differ materially across spot, perpetuals, and less liquid altcoin pairs.

They can also vary by time of day and by venue participant mix. As a rule: higher liquidity and higher trading activity compress spreads; lower liquidity and higher uncertainty widen them.