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Bid-Ask Spread

In simple terms

The bid-ask spread is the gap between what buyers are willing to pay and what sellers are asking for. Think of it like haggling at a flea market—if someone offers $90 and the seller wants $100, that $10 difference is the spread.

Definition

Difference between highest bid (buy) and lowest ask (sell) price.

In depth

The bid-ask spread represents the difference between the highest price a buyer will offer (bid) and the lowest price a seller will accept (ask) for an asset at a given moment. This spread functions as a transaction cost and liquidity indicator—tighter spreads indicate higher liquidity and lower friction for trades, while wider spreads suggest lower volume or higher volatility. Market makers profit by capturing this spread, continuously posting both buy and sell orders. In decentralized exchanges using automated market makers (AMMs), the spread is determined by the bonding curve and slippage mechanics rather than traditional order books.

How does Bid-Ask Spread work?

An order book has a highest bid, the most anyone currently offers to pay, and a lowest ask, the least anyone will accept. The spread is the gap between them, and the midpoint sits halfway. A taker who buys pays the ask and a taker who sells receives the bid, so buying and immediately selling loses the spread before any fee is added. Competing market makers narrow it, while volatility, thin overnight hours, and small or obscure trading pairs widen it, because quoting is riskier when prices move quickly.

An example

Illustrative figures only. A pair shows a bid of $99.90 and an ask of $100.10, so the spread is $0.20 around a $100.00 midpoint, or 0.2 percent. Buying 100 units at the ask costs $10,010. Selling them straight back at the bid returns $9,990, a $20 round-trip cost before trading fees. On a tighter pair quoting $99.99 by $100.01, the same round trip would cost $2.

Figures are illustrative only.

What beginners get wrong

  • Comparing exchanges on posted trading fees alone ignores the spread, which is frequently the larger cost on less liquid pairs.
  • A $0.50 spread is trivial on a $10,000 asset and very large on a $2 one, so compare spreads as a percentage.
  • The quoted spread applies only to the size available at those two prices; larger orders reach the worse levels behind them.
  • Spreads widen sharply during news events and low-volume hours, so a market order placed then can cost far more than usual.

Related terms

Part of

How does crypto trading and market structure work? — the subject page for trading and market structure, with all 27 of its definitions in one place.

Educational only — not financial advice.