Have you ever opened a crypto app and wondered why the Bitcoin buy and sell prices are so different? Even though the asset is the same, the numbers don’t match.

Well, this is actually very similar to a traditional market: someone wants to sell at a certain price and someone wants to buy at another, just waiting to see who’s willing to give in first.

In the crypto world, this bargaining concept is known as the bid and ask. So, to avoid confusion when looking at the order book, let’s first understand the difference between these two terms.

What Is a Bid in Crypto?

A bid is the highest price a buyer is willing to pay to purchase a crypto asset on the market. In a trading context, a bid indicates how much someone is willing to acquire that asset at a specific price.

For example, if you place a  buy order for Bitcoin (BTC) at Rp1,000,000,000, that number is called your bid. This means you are ready to buy BTC at that price, and the exchange system will place the order in the bid column of the order book.

The order book functions like a queue of transactions, where all buy requests (bids) are listed from highest to lowest.

The higher your bid price, the greater the chance your order will be prioritized and executed quickly.

From a market perspective, the bid reflects the level of demand because the more and higher bid prices appearing, the greater the buying interest in that asset.

While the bid represents the buying side, the ask represents the selling side.

What Is an Ask Price in the Crypto World?

An ask price is the lowest price a seller is willing to accept to sell their crypto assets. In trading, this term is often called an offer because it represents the seller’s offer price.

For example, if you place a sell order for Ethereum (ETH) at Rp50 million, that number is your ask price. This means you are ready to sell your ETH at that price, and the exchange system will display this order in the ask column of the order book.

In the order book, ask prices are arranged from lowest to highest. Sellers typically determine their selling price based on market conditions—some choose to sell quickly at a low price, while others wait for the price to rise to their target.

The ask price represents the supply in the crypto market. The more sell orders that appear at a certain price, the greater the supply of the asset at that price level. These two sides meet to form the market price you see on the exchange.

The Difference Between Bid and Ask: How Market Prices Are Formed

In the crypto world, market prices are formed by the intersection of two main parties: the bid (buy demand) and the ask (sell offer).

When the price offered by the buyer and the price asked by the seller meet at the same point, a transaction occurs, and that price is called the last price.

For example, imagine on an exchange where the highest bid price for Bitcoin is Rp1,000,000,000, while the lowest ask price offered by the seller is Rp1,002,000,000.

As long as the bid and ask prices do not match, a transaction cannot occur. If the seller lowers the ask price closer to Rp1,000,000,000, or the buyer raises the bid to Rp1,002,000,000, the two prices eventually meet.

At that point, the transaction occurs at the middle price, called the market price. The difference between the bid and ask prices is known as the spread.

A narrow spread indicates a liquid market with many active buyers and sellers. Conversely, a wide spread indicates less trading activity, allowing prices to fluctuate more easily.

This is why crypto prices can change every second—because the bid and ask positions in the market are constantly changing.

What Is the Bid-Ask Spread and Why Is It Important?

The bid-ask spread is the difference between the highest bid price and the lowest ask price in the market. This difference is an important measure of how actively an asset is traded.

A narrow spread indicates a liquid market, allowing transactions to occur quickly because many buyers and sellers are ready to transact at close prices.

Conversely, a wide spread indicates a quiet market, making it more difficult to find counterparties, and prices can move more slowly.

On crypto exchanges, large assets like Bitcoin (BTC) typically have narrow spreads due to their high trading volume.

For newer assets, spreads can be much wider because the number of buyers and sellers is still limited. Traders pay attention to this spread before placing an order.

Example of How to Read Bid and Ask Prices on an Exchange

To understand how prices work in the crypto world, you can start by opening the order book on an exchange.

There, you’ll see two sides with different colors: the green side displays bids, or buy requests, and the red side displays asks, or sell offers.

Each row in the order book shows the price, order volume, and sometimes the cumulative total at a specific price level.

The top row on the green side shows the highest bid, indicating buyers most willing to pay a high price, while the top row on the red side shows the lowest ask, indicating sellers most willing to sell their assets quickly.

From there, you can determine the transaction queue, meaning orders will be executed when the bid and ask prices meet.

High volume at a price level often acts as a “barrier” to movement because it indicates a large number of orders pending at that point.

Experienced traders typically pay attention to these bid and ask movements to assess market strength, whether buyers or sellers are dominating the market. Besides understanding the mechanism, it’s also important to understand how this concept benefits you.

Why Are Bid and Ask Prices Important for Crypto Traders?

Bid and ask prices are crucial for every crypto trader to understand because they reflect the actual price dynamics occurring in the market. From here, you can determine the most ideal buy and sell prices, rather than just randomly setting numbers.

For example, if you know the highest bid and lowest ask prices, you can place orders at more strategic points to increase your transaction opportunities.

Furthermore, bid and ask price movements also provide an indication of the direction of market pressure. If the number and volume of bids are higher, it means many buyers are ready to enter—a signal that the market is trending bullish.

Conversely, if the ask price dominates, sellers may be taking over, and the price could potentially fall. Traders often use this pattern to develop more precise entry and exit strategies.

As a note, avoid entering the market when the spread is too wide. Large spreads can lead to immediate losses due to the large difference between the buy and sell prices. Therefore, choose a time when the market is active and liquid.

But before you jump in, make sure you understand the security factors and execution speeds on the exchange.

Factors Affecting Bid and Ask

Several factors can cause bid and ask prices in the crypto market to fluctuate. One of these is market liquidity.

The more people buying and selling an asset on an exchange, the easier it is to transact, and the spread between the bid and ask becomes smaller. This is because supply and demand are balanced, allowing for faster price matching.

Conversely, if an asset is rarely traded, the spread can widen due to the limited number of buyers and sellers ready to place orders.

Another significant factor is price volatility. In the notoriously volatile crypto market, price movements can be very rapid.

When prices fluctuate significantly, spreads typically widen as market participants become more cautious when placing orders.

This often occurs during major news events, project updates, or global economic data releases that can quickly shift market sentiment.

Furthermore, market activity times also play a role. Unlike stocks, which have opening and closing hours, the crypto market operates 24/7.

However, there are certain times when transaction volume is higher, typically when the American, European, and Asian markets are all active. During these times, spreads tend to be tighter because more traders are trading.

By understanding all these factors, you can be more informed when placing orders.

Conclusion: Bid and Ask, Reflecting Crypto Market Dynamics

So, that was an interesting discussion about the difference between bid and ask as the basis for reading crypto prices, which you can read more about in the INDODAX Academy’s Crypto Academy.

In conclusion, bid essentially represents the buyer’s side, ask represents the seller’s side, and the spread serves as the bridge that connects the two to form the market price.

All three are crucial elements that reflect the movement and balance between supply and demand in the crypto world.

By understanding bid and ask, you not only know the price but also understand the pulse of the crypto market.

Therefore, before starting to trade, make it a habit to carefully read the order book. From there, you can see how buyers and sellers compete and find the best position to make decisions with more confidence.

By the way, in addition to gaining in-depth insights through various popular crypto education articles, you can also broaden your horizons through a collection of tutorials and choose from a variety of popular articles that suit your interests.

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FAQ

1.What are bid and ask in crypto?
A bid is the highest price a buyer is willing to pay, while an ask is the lowest price a seller is willing to accept.

2.Why are bid and ask prices different?
Because there’s always a difference between what buyers and sellers want, called the bid-ask spread.

3.What is the bid-ask spread and why is it important?
The spread is the difference between the buy and sell prices. A small spread means a liquid market, while a large spread means a quiet market.

4.How do I read bids and asks on an exchange?
Look at the order book: the green side is the bid (buyer), the red side is the ask (seller).

Author:  Boy