bid ask price spread

What Is the Bid-Ask Spread?

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid price) and the lowest price a seller is willing to accept (ask price). This gap represents the implicit cost you need to overcome when executing a trade.

Think of the order book as a restaurant’s order wall: on the left, buyers are queuing up with their bid prices; on the right, sellers are lined up with their ask prices. The closest buy and sell orders at the top of each side are called the best bid and best ask. The difference between them is the bid-ask spread. A narrower spread indicates a market that is easier to enter and exit, while a wider spread means higher transaction costs.

Why Does the Bid-Ask Spread Exist?

The bid-ask spread exists because buyers and sellers have different expectations regarding price, and the market needs to compensate participants for the risks and costs associated with immediate execution.

Three primary factors influence the spread:

1. Liquidity: The ease of buying and selling. A more liquid market with a higher number of closely placed orders typically has a tighter spread.
2. Volatility: Higher market volatility increases short-term pricing risk, which can widen the spread.
3. Market Makers’ Inventory and Costs: Market makers continuously quote buy and sell prices. They use the spread to cover inventory risk, funding costs, and operational expenses.

How Is the Bid-Ask Spread Calculated?

Calculating the bid-ask spread is straightforward:

• Absolute Spread = Best Ask Price − Best Bid Price
• Percentage Spread = Absolute Spread ÷ Reference Price (commonly the mid-price or best ask price)

For example, if the best bid is 100.00 and the best ask is 100.05, the absolute spread is 0.05. Using the mid-price (100.025) as a reference, the percentage spread is approximately 0.05 ÷ 100.025 ≈ 0.05%. You can also approximate by dividing the absolute spread by the ask or bid price.

In practice, many traders monitor both the absolute and percentage spread: the absolute value makes it easy to compare at a glance, while percentage values help benchmark across assets or trading pairs.

How Does the Bid-Ask Spread Affect Trading Costs?

The bid-ask spread translates directly into an implicit cost for entering and exiting positions—this effect is particularly pronounced when using market orders. A market order executes immediately against existing orders in the order book, so you automatically incur the cost of crossing the spread.

For instance: If you place a market buy at 100.05 (the best ask), then immediately sell at 100.00 (the best bid), you lose 0.05 per round trip, not including fees. Adding trading fees and slippage (the difference between expected and actual execution prices) can further increase short-term trading costs.

If you trade frequently or use high leverage, these costs—spread, fees, and slippage—can quickly erode your profits. To manage costs, consider trading during times of high liquidity and tight spreads, use limit orders to control execution prices, and split large orders into smaller blocks to reduce market impact.

What Are the Characteristics of Bid-Ask Spreads in Crypto Markets?

In crypto markets, bid-ask spreads typically reflect liquidity conditions and time-of-day patterns: leading trading pairs tend to have tighter spreads during active hours, while small-cap tokens or off-peak periods often see wider spreads.

As of December 2025, leading spot pairs often feature percentage spreads as low as several basis points (0.01%–0.05%) during high-liquidity sessions; however, during major news events or low-volume hours (such as overnight), spreads can widen significantly. For small-cap or newly listed tokens, spreads may range from dozens to hundreds of basis points, depending on current order book depth.

Stablecoin pairs (such as USDT-denominated pairs) generally maintain stable spreads. However, significant news, network congestion, or large fund movements can rapidly widen spreads. During systemic or network events, be alert to the combined risks of widened spreads and increased slippage.

How to View and Use the Bid-Ask Spread on Gate?

On Gate, you can observe the bid-ask spread directly on the spot trading page’s order book—the distance between the best bid and best ask is your current spread.

1. Step One: Open the Gate spot trading interface, select a trading pair like BTC/USDT, and ensure you can see both the order book and available depth levels.
2. Step Two: Check the best bid and best ask prices; calculate both the absolute and percentage spread (absolute spread / best ask price or using mid-price as reference). You may adjust depth aggregation for more granular or broader views.
3. Step Three: Choose your order type based on observed spread and market depth. If spreads are tight with good depth, market orders typically execute quickly; for wider spreads or larger orders, use limit orders and execute in batches to minimize slippage and costs.

Many traders on Gate combine conditional orders or stop-loss orders with “entry price and spread thresholds” as part of their risk controls. In periods of tight spreads and moderate volatility, grid trading strategies can capture small price movements near the spread by layering multiple orders.

How Does Bid-Ask Spread Relate to Order Types?

Limit orders let you set your own price—the trade executes only if the market reaches your chosen price point, so you have control over whether to cross the spread. Market orders are executed immediately at current prices in the order book, meaning you always incur both the spread and potential slippage.

Placing passive limit orders (waiting in the order book) may let you capture part of the spread, but there’s no guarantee of execution. Taker orders (executed immediately at market price) provide speed but always pay the spread. Stop-loss and trigger orders can experience “gaps” during high volatility—both spreads and slippage can widen dramatically, so it’s important to set trigger prices and protection levels carefully.

If you’re using leverage or trading contracts, entering or exiting positions during wide spreads increases both cost and risk. With high volatility or thin liquidity, market orders may fill at worse-than-expected prices—always monitor position size and margin safety.

Key Takeaways on Bid-Ask Spreads

The bid-ask spread—the difference between best bid and best ask—directly impacts your implicit entry and exit costs. It is shaped by liquidity, volatility, and market-making mechanisms, varying significantly across times and conditions in crypto markets. Mastering both absolute and percentage spread calculations allows you to gauge market conditions via Gate’s order book depth; combining limit orders, batch execution, and optimal timing can dramatically reduce overall costs from both spread and slippage. Exercise extra caution during news events or low-liquidity periods—avoid high-leverage trades during wide spreads to protect capital and manage risk effectively.

FAQ

What Do Bid Price and Ask Price Mean?

The Bid Price is the highest price a buyer is willing to pay; the Ask Price is the lowest price a seller will accept. The difference between them forms the bid-ask spread. In simple terms: bid prices are always lower than ask prices; this gap is where exchanges or market makers earn their revenue.

Why Is My Order Price on Gate Different from Market Price?

This happens because of the bid-ask spread. The displayed market price is typically the latest trade price—but when you place an order, you interact with real-time bid and ask prices. Buying executes at the higher ask price; selling at the lower bid price—the difference is your hidden trading cost.

Does Spread Size Affect My Trades?

Absolutely—bid-ask spread directly affects your trading costs and returns. A wider spread means buying costs more and selling yields less, reducing overall profitability. On Gate, leading coins usually have tight spreads; illiquid or obscure pairs often show much wider gaps—active traders should pay close attention.

Is There a Difference Between Limit Orders and Market Orders Regarding Spread?

Yes—market orders execute instantly at current ask (buy) or bid (sell), absorbing full spread costs. Limit orders let you specify your preferred price, often between bid and ask; this helps avoid some spread cost but may require waiting longer for execution.

Why Do Stablecoins Have Different Spreads from Major Cryptos?

Liquidity is key: major assets like BTC or ETH have high trading volumes with intense competition among market makers, resulting in extremely tight spreads (sometimes just a few sats or tiny percentages). For USDT or other stablecoins, unique trading demands or lower liquidity in certain pairs can create wider spreads. Choosing high-liquidity pairs on Gate is an effective way to keep trading costs down.