Why Do Newly Listed Cryptocurrencies or Stocks Typically Have a Wider Bid-Ask Spread?

Newly listed cryptocurrencies or stocks typically have a wider bid-ask spread due to a combination of factors. First, there is often a lack of historical data and a high degree of uncertainty about their true value, which makes it riskier for market makers to provide liquidity.

Second, there is usually a smaller pool of buyers and sellers for a new asset, resulting in lower trading volume and less competition among market makers. This lack of competition allows market makers to quote a wider spread.

As the asset becomes more established and trading volume increases, the bid-ask spread will typically narrow.