If you’ve ever placed a trade, you’ve already seen the bid and ask price — even if you didn’t realize it. These two numbers show what buyers are willing to pay and what sellers are willing to accept. Understanding how they work can help you avoid bad trades, save money, and make smarter decisions.
In this guide, we’ll break down what “bid” and “ask” mean in crypto, how they affect your trades, and how to use them to your advantage.
Key Takeaways
- The bid price is what buyers are willing to pay for an asset.
- The ask price (or offer price) is what sellers want to receive.
- The bid-ask spread is the difference between the two. A narrow spread usually means high liquidity.
Understanding the Bid and Ask Price
Before we dive into strategies or technical aspects of the concept, let’s quickly overview the bid and ask price.
What Does “Bid Price” Mean?
The bid is the highest price a buyer is willing to pay for a cryptocurrency — basically, a buy offer. If you’re selling your crypto right now, this is the price you’ll get.
The bid reflects demand: when more people want to buy, bids usually go higher.
For example, if someone places a bid for Bitcoin at $65,000, that’s the most they’re willing to pay. On exchanges, buyers place these bids in the order book, hoping someone will accept.
What Does “Ask Price” Mean?
The ask price (also called the “offer” price) is the lowest price a seller is willing to accept.
If you want to buy crypto instantly, you’ll pay the ask price. It reflects supply—the more people trying to sell, the lower the ask usually gets.
For example, if a trader sets an ask at $65,500 for Bitcoin, that’s the minimum they’re willing to sell for. A buyer has to match that price to complete the trade.
What is the Bid-Ask Spread?
The bid-ask spread refers to the cost of the asking price minus the bid price. It tells you a great deal about the liquidity of a crypto asset.
Tight spread = liquid market (wide spread of sellers and buyers)
Wide spread = illiquid market (low trading activity, costly)
Let’s suppose:
- Bid price: $64,950
- Ask price: $65,050
- Spread: $100
That $100 difference means if you were to buy and sell instantly, you’d lose $100 just on the spread.
On most platforms, the spread in the order book, with one side showing bids and the other showing asks, fluctuates in real-time.
How do Bid and Ask Prices Work?
Now that we’ve familiarized ourselves with bid and ask prices, let’s see how they work in the background when trading.
Order Books and Matching Engines
Crypto exchanges use an order book to display all currently active buy and sell offers. It’s basically a live list of bids from buyers and asks from sellers, and a matching engine matches them up when prices align.
Let’s visualize how it would appear on an order book:
The closest prices form the current bid and ask.
Market Orders vs. Limit Orders
What type of order you put in determines how the bid and ask prices will impact you.
Market order: You buy or sell instantly at the best available price. If you’re buying, you’ll pay the current ask. If you’re selling, you’ll get the current bid.
Market orders are fast, but you accept the spread, meaning you might pay more or sell for less than you’d like.
Watch out when using market orders. You may end up paying more or selling for less, especially in illiquid cases.
Limit order: You set your own price and wait for someone else to match it.
Limit orders take longer but give you more control and can save you money, especially in volatile or low-liquidity markets.
Slippage and Its Impact on Trading
Slippage takes place when your trade settles at a different price than what you expected, most often as a result of the price rapidly moving, insufficient orders at your stated price, or an excessive spread.
It normally happens for low-volume tokens or during times of market turbulence.
If the ask is at $1.00 but your large purchase order cuts into the next level prices ($1.02, $1.05, and so on), you pay more in total.
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What Factors Affect the Bid and Ask Price in Crypto?
Bid and ask prices change constantly, but not randomly. Several key factors influence where they land and how far apart they become.
Liquidity and Trading Volume
Liquidity is the biggest driver as it refers to how many people are actively buying and selling a coin. When there’s high volume and lots of activity, bid and ask prices tend to stay close together. This is called a tight spread, and it usually means you can get in and out of trades quickly and without losing much in the process.
For example, Bitcoin and Ethereum have massive trading volumes across most exchanges. As a result, their spreads are usually just a few dollars or cents, making them cheaper and more convenient to trade.
With smaller or lesser-known coins, especially on decentralized exchanges (DEXs), the spread is often much wider. If fewer people are trading, the gap between what buyers will pay and what sellers will accept grows. That means more slippage, more risk, and a higher cost just to complete the trade.
Market Volatility and News Events
The crypto market moves fast and during breaking news or sudden price swings, bid and ask spreads can widen in seconds.
This happens because both buyers and sellers get nervous. Buyers lower their bids to avoid overpaying, while sellers raise their asks to avoid getting underpaid. That hesitation widens the spread and makes it harder to get a fair execution unless you’re willing to wait or pay more.
For instance, after major events like a regulatory announcement or exchange hack, spreads typically widen as traders readjust. The same thing can happen during economic releases like CPI reports, FOMC meetings, or even viral posts on X.
Exchange Type and Market Conditions
Different types of exchanges handle trades in different ways, and that also affects bid and ask pricing.
Centralized exchanges (CEXs) like Coinbase or Binance tend to have tighter spreads thanks to deeper liquidity and faster matching engines. While decentralized exchanges (DEXs) rely on liquidity pools, which often results in wider spreads, especially for low-cap tokens.
The type of market matters too. Spot markets (where you trade the actual asset) behave differently from futures or derivatives markets. In leveraged trading, things like funding rates and open interest can also affect how prices are set.
How to Use Bid and Ask Prices for Better Trading Decisions
Understanding how bid and ask prices work is one thing, but using that knowledge to improve your trades? That’s where it gets interesting.
Choose The Right Entry and Exit Points
Watching the spread can help you avoid poor trade execution. If the spread is wide, placing a market order could cost you more than expected. A small spread, on the other hand, usually signals high liquidity, and a good time to act.
In these situations, most traders prefer using limit orders. By setting a buy price slightly below the current ask (or a sell price slightly above the current bid), you increase your chances of getting filled at a better rate without chasing the market.
It’s a simple way to reduce trading fees and avoid unnecessary slippage, especially when trading large amounts or low-volume coins.
Create Trading Strategies Based on Bid-Ask Spread
Some advanced strategies are built entirely around the bid-ask spread. Scalpers, for example, aim to profit from small price moves across tight spreads. They make frequent trades throughout the day, trying to capture quick gains without holding positions long-term.
Market makers take it a step further by placing both buy and sell orders at different price levels. If they buy at the bid and sell at the ask, they profit from the spread itself — even if the overall price doesn’t move much.
Even if you’re not using these strategies, being aware of the spread can help you avoid thin markets and bad trade execution. In general, it’s best to avoid trading coins with low liquidity or unusually wide spreads — unless you’re prepared to wait or accept higher risk.
Conclusion
Bid and ask prices are a live snapshot of market activity. They tell you where buyers and sellers are, how active the market is, and how much it might cost to place a trade.
Whether you’re buying your first token or trading actively, it’s worth taking a second to consider the bid-ask spread. Use limit orders when possible, check liquidity, and always glance at the spread before hitting “buy” or “sell.”
It only takes a few seconds — but it could save you a lot more in the end.
FAQs
What is the bid price in cryptocurrency trading?
It’s the highest price a buyer is willing to pay for a crypto asset.
What does the ask price represent in crypto markets?
It’s the lowest price a seller is willing to accept for their crypto asset.
How does the bid-ask spread affect my trades?
A wider spread usually means higher costs when entering or exiting a trade, especially if you use market orders.
Why does the bid-ask spread widen during high volatility?
Because traders become cautious, buyers lower bids and sellers raise asks, increasing the gap between them.
How do order books display bid and ask prices on exchanges?
Order books display real-time lists of all buy (bid) and sell (ask) orders, sorted by price and size.
What is the difference between market orders and limit orders?
Market orders fill instantly at the best available price while limit orders let you set your own price but might not be filled right away.
Why do crypto exchanges have different bid and ask prices?
Each exchange has its own users, liquidity levels, and order books, leading to slightly different prices.
How can traders take advantage of bid and ask prices?
Some traders (like scalpers and market makers) profit by buying at the bid and selling at the ask, capturing the spread.
How does liquidity affect the bid-ask spread in crypto markets?
Higher liquidity means more buyers and sellers, which usually tightens the spread and lowers trading costs.
References
- Understanding the Bid-Ask Spread: How Buyers and Sellers Match on Price – Nasdaq
- Understanding the Different Order Types – Binance Academy
- Liquidity and Immediacy – CME Group
- Investor Bulletin – Trading Basics – SEC
