The ‘Spread’ on Bitcoin markets can be defined as the gap between the highest bid price quoted by a buyer, and the lowest ask price offered by a seller.
This price difference is an essential aspect of trading as it reflects the cost of transacting Bitcoin. To put it simply, buyers will have to pay a little more than the existing market price to purchase Bitcoin while sellers will receive a little less than the market rate when selling.
The market conditions play a key role in determining the spread, which can either be narrow or broad. When trading volume and volatility are high, the spread tends to reduce, whereas the opposite is true when trading volume and price volatility are low.
For cost-effective trades, traders usually choose markets that have tight spreads. Monitoring the spread can also provide valuable insights into the market sentiment, particularly when wider spreads indicate more uncertainty and carefulness among traders.
