How Does the Bid-Offer Spread Relate to Market Liquidity in Cryptocurrency Trading?

In crypto, a smaller bid-offer spread signals higher market liquidity. High liquidity means there are many buyers and sellers, allowing large orders to be executed quickly without significantly moving the price.

A wide spread, conversely, indicates low liquidity, making it costly and difficult to enter or exit positions. Traders prefer narrow spreads to minimize slippage and transaction costs.