Crypto glossary

Bid-Ask Spread

The bid-ask spread is the difference between the highest price a buyer is currently willing to pay (the bid) and the lowest price a seller is willing to accept (the ask). A narrow spread usually signals a liquid market; a wide one signals thin trading.

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Reading the spread in an order book

An exchange order book lists buy orders on one side and sell orders on the other. The best bid is the top of the buy side, the best ask the top of the sell side. The gap between them is the spread, often shown as an absolute amount or as a percentage of the price.

If you buy instantly with a market order, you pay the ask. If you sell instantly, you receive the bid. The midpoint between them is often treated as the fair price at that moment.

An example

Say the best bid for a token is 9.98 dollars and the best ask is 10.02 dollars. The spread is 0.04 dollars, or 0.4% of the midpoint of 10 dollars. If you buy 1,000 dollars worth and immediately sell again, you lose roughly 4 dollars to the spread alone, before any exchange fees.

For a heavily traded asset on a large exchange, the spread may be a tiny fraction of that. For a small token, it can be several percent.

What makes spreads wide or narrow

Spreads are narrow when many buyers and sellers compete and market makers quote prices continuously. They widen when trading is thin, when prices move fast, around major news or data releases, and on smaller exchanges or decentralized markets with little liquidity.

Market makers earn part of their income from the spread. When uncertainty rises, they widen their quotes to protect themselves, which is why spreads often jump exactly when many traders want to act.

Why it matters to you

The spread is a real cost of trading even when no fee is shown. Frequent traders pay it repeatedly. Placing limit orders inside the spread can reduce it, at the risk of not being filled. For large orders, also check market depth, because slippage can add cost beyond the visible spread.

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Frequently asked questions

Is the bid-ask spread a fee?

Not formally, but it works like one. Buying at the ask and selling at the bid costs you the spread, in addition to any trading fees.

What is a good bid-ask spread?

It depends on the asset and venue. Major cryptocurrencies on large exchanges often have spreads of a small fraction of a percent, while small tokens can have spreads of several percent.

How can I reduce spread costs?

Using limit orders, trading during active hours, avoiding trades right around major news and sticking to liquid markets can all help.

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All glossary terms · Educational reference only — not investment, legal, tax or financial advice.