What Is Spread (Bid-Ask Spread)?

For example, if the highest bid for a coin is $99.80 and the lowest ask is $100.20, the spread is $0.40; this corresponds to about 0.4 percent of the price. Someone who wants to buy immediately buys at $100.20, and someone who wants to sell immediately sells at $99.80. A person who buys an asset and immediately sells it back loses the amount of the spread, apart from commissions.

The width of the spread depends largely on liquidity. For high-volume assets such as Bitcoin and Ethereum, the spread on major exchanges is generally very tight; for low-volume altcoins, it can widen noticeably. Market makers narrow the spread by continuously placing orders on the bid and ask sides, and they earn their income from this difference. During sudden news and periods of high volatility, the spread can widen because market makers reduce their risk.

Some intermediary platforms and quick buy-sell screens advertised as 'commission-free' can build the cost into a wide spread instead of an explicit commission. For this reason, when comparing trading costs, one should look not only at the commission rate but also at the difference between the buy and sell prices.