Great News - The BTC Bid-Ask Spread getting tighter and tighter on major crypto exchanges...

in GEMS2 months ago

Binance and Bitmex are both reporting lower Bid-Ask spreads than ever before

In a great sign that the crypto industry is maturing, the spreads offered at popular cryptocurrency exchanges are getting narrower and narrower.

Binance for example, recently had a spread of just .25% on a $10 million quote...

Which was an all time low according to data analytics firm skew:

image.png

(Source: https://analytics.skew.com/dashboard/bitcoin-futures)

As I mentioned above, this is very good news for the crypto industry as a whole.

In general, the tighter the spread, the deeper the order book, and the more a market is able to withstand price shocks.

Cool, buy why does this matter?

Some of you out there may be wondering why this matters...

Well, it matters for several reasons.

For one, this means that whenever you want to go place a trade, you are likely to get a better price than you would have previously.

In order to buy or sell immediately the trade often must be executed at the bid or the ask, and the further the spread between the two, the more you lose by being in a hurry.

The narrower the spread the less you would lose buy buying and selling immediately.

Secondly, a narrow bid-ask spread is a sign of order book depth.

Meaning there are a lot of buyers and sellers putting up orders creating a lot of liquidity for investors/traders.

This is great news for price stability as well as for attracting institutional type investors.

Liquidity (order book depth) is something that large investors need before they will feel comfortable getting involved in an investment.

If there isn't sufficient liquidity they end up paying significantly more to place a trade than they "should have".

Which means, a tighter big/ask spread is likely to encourage more big players to get involved and also is a great sign the bitcoin markets overall are maturing.

Onwards and upwards!

Stay informed my friends.

-Doc

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