What is the spread?

Why, if you buy a crypto and sell it right away, might you get back less money even though the market hasn’t moved? The answer often lies in the spread, i.e. the difference between buy and sell prices (bid-ask spread).

Think of a currency exchange booth: it gives one price to buy your euros and another to sell them to you. Similarly, in a crypto exchange’s order book, buyers state how much they’re offering and sellers how much they’re asking. The highest bid and the lowest ask form the spread.

Say a token’s best bid is €99 and its best ask is €101. The spread is €2 per token. If you instantly buy one token at €101 and instantly sell it at €99, the difference is €2, before any fees. The example assumes prices stay put and there’s enough quantity available at those prices.

Why it matters

The spread is a cost of trading immediately, even if it doesn’t appear as a separate fee. That’s why we don’t consider a “zero commission” label enough to understand what a trade costs. The price at which it’s actually executed counts too.

In markets with many active buyers and sellers, the spread is usually tighter. When liquidity is thin or prices move sharply, it can widen. The same token can also have a different spread on each exchange and each trading pair, for example against the euro or against a stablecoin.

What to watch out for

The spread isn’t the same as slippage. The first is the gap between the best available buy and sell prices. The second is the difference between the expected price and the execution price, for example because a large order uses up the quantities available at the best prices.

A limit order lets you set an acceptable price, but it doesn’t guarantee execution. Also, a tight spread on its own doesn’t mean there’s enough liquidity for a large trade.