What are the factors that can cause bid-ask spread to widen in the cryptocurrency market?

3 answers

• Feb 18, 2022 · 3 years ago
  One factor that can cause the bid-ask spread to widen in the cryptocurrency market is low liquidity. When there are not enough buyers and sellers in the market, it becomes difficult to match orders, resulting in a wider spread. This can happen during periods of low trading volume or when there is a lack of interest in a particular cryptocurrency. 😬
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• Feb 18, 2022 · 3 years ago
  Another factor that can contribute to a wider bid-ask spread is market volatility. When the price of a cryptocurrency is highly volatile, it can lead to rapid price fluctuations and uncertainty. This can make traders hesitant to place orders, leading to a wider spread as there may be fewer participants willing to buy or sell at a given price. 😳
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• Feb 18, 2022 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, explains that one of the main factors behind a wider bid-ask spread is the presence of market makers. Market makers are traders or institutions that provide liquidity to the market by continuously quoting both buy and sell prices. If there are fewer market makers or they are less active, it can result in a wider spread as there may be fewer competitive quotes available. However, it's important to note that wider spreads can also present trading opportunities for savvy traders. 💪
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