For most of its part, cryptocurrency trading functions like most other financial markets such as foreign exchange, stock market, mutual fund, and futures contract. They all function similarly when it comes to trading and current market price updates. In trading, traders are usually more concerned about the buy-sell price otherwise referred to as the ask price or bid-ask price.

The bid price represents the maximum price a buyer is willing to offer for the underlying digital asset. The ask price is the minimum price or the selling price that a seller is willing to take for the digital asset they will part with. The difference between bid orders is called the bid-ask spread. The price difference (spread) is what exchange platforms usually take as gains. Bid-ask spread cost is also a major source of liquidity enhancement in an exchange.

Market Liquidity

Usually, ample liquidity has the lowest spread because many traders are willing to trade at any point. An illiquid market on the other hand has a wider spread because traders are limited. Transaction cost on an exchange is also a key determinant of the bid-ask price gap.

The cryptocurrency market is highly volatile, therefore, bid-ask price spreads fluctuate from time to time.