Cryptocurrency bid and ask price meaning, difference and examples
Trading cryptocurrency can be intimidating at first to the newbie investor. There’s a lot to learn and so many different terms to define. You don’t have to be worried though, because with a little research you’ll be prepared to trade crypto like a pro.
In this article, we’re going to learn about the meaning of bid and ask prices in cryptocurrency. What are they? How do you use them in your trading strategies? Soon you’ll understand exactly what bids and asks are, and you’ll be ready to start trading crypto assets on any exchange. Let’s get started!
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What is cryptocurrency bid price?
When you’re trading public assets, such as cryptocurrency, you are really involved in a form of the auction. It’s not the same as going into the store and purchasing a soda where that product will always be the same price.
The value of cryptocurrencies fluctuate based on what people are willing to pay for them, and when you set a bid price you are stating how much you’re willing to pay for a coin or token.
This can also be a useful tool in gauging how optimistic the market is for a particular asset. If there are lots of bids that seem to be overwhelming the asks, then things will likely be looking up for that crypto coin or token.
What is crypto ask price?
The ask price is just like the bid but for sellers. Sellers set the price that they are willing to sell their cryptocurrencies for. When you set a sell cost for your crypto coins, you are telling buyers that you’re not willing to accept less than that price.
In the order book you’ll see a list of other asks from sellers. This allows you to see if there are more sellers than buyers, and it can be a good indication of the health of an asset at a certain price. If there are a lot more asks than bids, then the value of the asset might be getting ready to fall.
What’s the difference between the bid and ask prices?
The bid order book is filled with the deals of people who are looking to purchase cryptocurrency. The ask order book is filled with bids of people who are looking to sell cryptocurrency. When the bids and asks come to an agreement, the sale or purchase can take place.
In many cases, there will be a price spread between these two numbers. This means that if you’re planning to flip currencies, then you’ll need to make sure you’ve made enough profit to cover the spread and the crypto exchange fees and still have something left for yourself.
Can you give an example of a cryptocurrency bid and ask price?
Jimmy wants to buy a certain crypto token. He sees that lowest asking price is $1 per token. However, he doesn’t really want to pay this much. He thinks that $0.90 is a more realistic price, so he sets a bid order of $0.90 instead.
The market stays stuck at a dollar for a while, but eventually, a buyer comes along that needs to sell a good deal of tokens. He quickly empties all of the bids, and the price goes down to $0.90. Jimmy’s bid is triggered, and the tokens are purchased for the price he specified.
Now let’s say that the market has been going up and down all day. Jimmy sees an opportunity here. He decides to set an asking price for the tokens he purchased. He sets his ask at $1 per token. The market trades up and down for a while, but by the next morning, the price of the tokens has gone back up to $1 again. Jimmy’s order triggers and he makes a profit of 0.10 cents per token on his investment thanks to waiting for a better price.
What happens when the bid price is higher than ask?
Bids which are higher than the current asking price should be automatically filled by the cryptocurrency exchange. This will also drive up the value of the asset because a purchase has been made above the current market price level. If a large order comes through and you watch the order books, then you’ll likely see many traders hastily adjusting their bids and asks to reflect this change.
There are of course instances where the bid on one exchange will vary from another, and this allows investors to take advantage of arbitrage opportunities to profit off of these price differences. If you’re interested in trying your hand at profiting from arbitrage on exchange’s different bids and asks, Bitsgap has tools that can help!
What happens when the bid price is lower than ask?
If the bid price is lower than the ask, orders will not execute. Both buyers and sellers will have to come to an agreement on the price before this happens. Sellers or buyers may be encouraged to change their bids and asks based on market conditions or news.
Basically, you’re waiting for someone to budge in either direction to drive the price either up or down. Setting your bid lower than the ask is how you make trades which can be profitable for you later.
Bid vs ask vs market price
When trading cryptocurrency you can choose the price that you want to pay for an asset as long as you’re willing to wait long enough to get it. The market price is the current value of a particular token or coin on that exchange. If you choose to buy or sell for the market price, then your order will be filled using whatever inventory is available from the current bids or asks.
If you set an ask or a bid price, your order will only fill when the market conditions match those values. The name of the game is to sell your tokens for more than you paid, and using all of these order types effectively is how you can profit during your trades.