Understanding the Bid‑Ask Spread in Cryptocurrency Markets

Quick Summary

• The Bid‑Ask Spread is the gap between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask) shows how liquid a crypto asset is.
• Spread percentage = (Ask-Bid) ÷ Ask×100%.
• High‑volume coins like Bitcoin usually have spreads under 0.1%, while low‑volume altcoins can see spreads above 2%.
• Market orders pay the full spread; limit orders can reduce cost but risk non‑execution.
• Choosing an exchange with tight spreads and active market makers saves money over time.

What the Bid‑Ask Spread Actually Is

When you look at any crypto trade, the Bid‑Ask Spread represents the difference between the highest price a buyer is ready to pay (the bid) and the lowest price a seller will accept (the ask) tells you how tight or wide the market is. A narrow spread means many participants are offering similar prices, which usually signals good liquidity. A wide spread hints that few traders are willing to buy or sell at comparable levels, raising transaction costs.

The two sides of the spread have their own names:

• Bid Price is the highest price a buyer is willing to pay for a cryptocurrency at a given moment.
• Ask Price is the lowest price a seller is ready to accept for the same asset.

Because the ask is always equal to or higher than the bid, the spread is never negative.

How to Calculate the Spread Percentage

The most common way to compare spreads across different coins or exchanges is to express the gap as a percentage of the ask price:

Spread% = (Ask-Bid) ÷ Ask×100%

For example, if Bitcoin’s ask is $30,200 and the bid is $30,150, the spread is $50. Plugging into the formula gives (50 ÷ 30,200)×100% ≈ 0.17%.

This simple metric lets you see whether a market is cheap to trade or whether you’ll be paying a hidden fee.

Why Liquidity Drives the Spread

Liquidity measures how easily an asset can be bought or sold without moving the price is the main factor that squeezes or widens the spread. When many buyers and sellers are active, orders pile up near each other, forcing the bid and ask to converge. When trading volume dries up, each side retreats, and the gap widens.

Data from leading exchanges shows an inverse relationship:

• Bitcoin (≈1BUSD daily volume) - average spread 0.08%.
• Ethereum (≈500MUSD daily volume) - average spread 0.12%.
• Low‑volume altcoin X (≈5MUSD daily volume) - average spread 2.4%.

This pattern mirrors traditional markets: big‑cap stocks and major forex pairs have tiny spreads, while small‑cap stocks cost more to move.

Impact on Different Order Types

Market Order executes immediately at the best available price guarantees speed but obliges you to accept the full spread. In a thin market, that can mean paying a few percent extra without realizing it.

Conversely, a Limit Order sets a specific price you’re willing to buy or sell at lets you sit between the bid and ask, potentially avoiding the whole spread. The trade‑off is uncertainty: the order may never fill if the market never reaches your price.

Both order types are also exposed to Slippage the difference between the expected execution price and the actual price caused by market movement during order processing. Slippage is especially painful when the spread is already wide, so traders often monitor both metrics together.

How Exchanges Influence the Spread

Not all Exchanges are platforms where crypto buyers and sellers meet to trade assets are created equal. Large, high‑traffic venues (e.g., Binance, Coinbase Pro) attract professional market makers who continuously post limit orders, tightening spreads. Smaller or newer exchanges lack that depth, so their spreads can be several times larger.

Below is a quick comparison of average spreads for three popular assets on three different exchanges as of October2025:

Notice how the high‑volume coins stay under 0.1% even on a single exchange, while the low‑volume altcoin struggles to get under 3%.

Practical Tips to Keep Spread Costs Low

• Always check the spread before hitting a market order, especially during volatile periods.
• Use limit orders placed just inside the spread when you can afford a short wait.
• Trade on the exchange with the highest Market Maker entity that continuously posts bid and ask quotes to provide liquidity activity for the asset you want.
• Split large orders into smaller chunks to avoid moving the price and widening the spread.
• Monitor real‑time spread charts (many platforms offer a “spread heatmap”) to spot moments when spreads narrow.

By treating the spread as a visible cost rather than an invisible fee, you can shave off a noticeable percentage from your trading results over time.

Frequently Asked Questions

Takeaway

Understanding the bid ask spread is essential for any crypto trader looking to keep costs down and improve execution quality. By monitoring liquidity, choosing the right exchange, and using limit orders when feasible, you can turn a hidden fee into a manageable metric. Keep an eye on both spread and slippage, and let the numbers guide your entry and exit decisions.