How Does Liquidity Affect the Bid-Offer Spread in Cryptocurrency Markets?
High liquidity means there are many buyers and sellers, leading to a small or tight bid-offer spread. This is because competition forces the bid and offer prices closer together.
Conversely, low liquidity in a crypto asset results in a wide spread, making transactions more expensive. A tight spread suggests an efficient market with easier execution.
Glossar
Cryptocurrency Liquidity
Depth ⎊ Cryptocurrency liquidity, within digital asset markets, represents the ease with which an asset can be bought or sold without causing significant price impact, a critical component for efficient price discovery and reduced trading costs.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.
Centralized Exchanges
Exchange ⎊ Centralized exchanges (CEXs) represent a critical infrastructure within cryptocurrency markets, facilitating order matching and settlement for a diverse range of digital assets, including options and derivatives.