What Is the Bid-Ask Spread?
The bid-ask spread is the difference between the best bid (highest buy order) and the best ask (lowest sell order) in an order book. It represents the implicit cost of trading — the wider the spread, the more it costs to enter and exit positions.
How the Bid-Ask Spread Works
If BTC has a best bid of $65,000 and a best ask of $65,005, the spread is $5. A market buyer pays $65,005 and could immediately sell at $65,000, losing $5 per BTC. Spreads narrow in liquid, actively traded markets and widen during low volume or high volatility.
Why It Matters for Traders
The spread is a hidden transaction cost. For active traders executing many trades, spread costs compound quickly. Monitoring spread dynamics reveals market health — tightening spreads signal improving conditions, while sudden widening can precede volatility events or indicate thin liquidity.