Definition
The bid ask spread is a basic trading concept that measures the price gap between what buyers bid for an asset and what sellers ask for it. The bid is the highest price a buyer is currently offering, while the ask is the lowest price a seller is currently willing to accept. The spread is simply the ask price minus the bid price, expressed in the asset’s trading currency or sometimes as a percentage.
In crypto markets, the bid ask spread reflects how easily an asset can be traded at or near its current quoted price. A narrow spread usually indicates more active trading and closer agreement between buyers and sellers, while a wider spread suggests less agreement or thinner trading activity. The spread is continuously visible in the market’s Order Book, where current bids and asks are listed.
Context and Usage
The bid ask spread is a key part of trading costs because market participants effectively transact somewhere between the bid and ask prices. Even when explicit fees are low, a wide spread can increase the total cost of entering or exiting a position. In highly traded markets, competition among buyers and sellers tends to keep the spread relatively tight.
In fast-moving or less liquid markets, the bid ask spread can widen quickly, contributing to Slippage when orders are executed at prices different from the last visible quote. For market makers and liquidity providers, the spread represents potential revenue for standing ready to buy at the bid and sell at the ask. Across centralized and decentralized trading venues, the bid ask spread remains a core indicator of market tightness and trading efficiency.