In Cryptocurrency Trading, Why Are Bid-Offer Spreads Often Wider for Less Liquid Altcoins than for Bitcoin? ▴ Learn

In Cryptocurrency Trading, Why Are Bid-Offer Spreads Often Wider for Less Liquid Altcoins than for Bitcoin?

Spreads are primarily a reflection of market liquidity. Less liquid altcoins have fewer active buyers and sellers and lower trading volume compared to highly liquid assets like Bitcoin.

This low volume and fragmented order book mean there is less competition to narrow the spread. Market makers on these altcoins require a wider margin to compensate for the difficulty and risk of executing large orders and unwinding their positions.

How Do “Greeks” like Gamma and Vega Influence a Market Maker’s Spread Adjustments?

How Is the Risk Taken by a Market Maker Compensated through the Spread?

Why Do Stablecoins Typically Have a Very Narrow Bid-Offer Spread?

How Does a Market maker’S’inventory Risk’ Directly Cause the Bid-Offer Spread to Widen during High Volatility?