Bid–ask spread: what it is and how to read it
Updated 2026-07-05
The bid–ask spread is the gap between the best bid (the highest price a buyer will pay) and the best ask (the lowest price a seller will accept). It is the immediate cost of crossing the order book with a market order: buy at the ask, sell at the bid, and the round trip loses the spread before price moves at all. A tight spread signals a liquid, calm market; a wide spread signals thin liquidity or stress. MarketTrace reports spread_bps.
What the spread measures
Every order book has two sides: resting bids below the mid price, resting asks above it. The best bid and best ask are the innermost prices — the top of book. The distance between them is the spread. Quoted in basis points (bps), it is the spread divided by the mid price times 10,000, which makes it comparable across assets and price levels.
The spread is the market maker's compensation for providing liquidity and bearing inventory and adverse-selection risk. When making a two-sided market is cheap and safe — deep flow, low volatility — makers quote tight and compete the spread down. When it is risky — thin book, fast tape, news — they widen quotes to protect themselves, and the spread blows out.
Tight versus wide
A tight spread (a fraction of a basis point on BTC in normal conditions) means you can enter and exit at almost the same price: liquidity is deep and the two sides agree on value. It is the hallmark of a calm, liquid market.
A wide spread means crossing the book is expensive and the top of book is thin. It shows up in illiquid assets, off-hours, and during volatility spikes when makers pull quotes. Watching the spread widen in real time is an early warning that liquidity is evaporating — often just before a fast move or a liquidation cascade.
Why MarketTrace reports a single-venue spread
MarketTrace tracks the order book across four venues. It would be tempting to publish a consolidated spread from the best bid and best ask across all of them — but that is misleading. Because venues are never perfectly synced, the highest bid on one venue can sit above the lowest ask on another for a moment, producing a false negative spread that no single trader could ever actually cross.
So spread_bps is the tightest genuine single-venue spread: the narrowest bid–ask that actually exists on one book at one instant. It is the real, executable cost of crossing — not a cross-venue artifact. It travels with the order-book imbalance and order-flow context so you can see liquidity and pressure together.
Related
Frequently asked questions
What is the bid-ask spread?
The bid–ask spread is the difference between the best bid (highest price a buyer is willing to pay) and the best ask (lowest price a seller will accept) on an order book. It is the immediate cost of trading with a market order: you buy at the ask and sell at the bid, so a round trip loses the spread even if the price never moves. MarketTrace quotes it in basis points as spread_bps.
What does a wide spread mean?
A wide spread means the top of the book is thin and crossing it is expensive. Market makers widen their quotes when providing liquidity is risky — during volatility spikes, in illiquid assets, or in off-hours — to protect against fast moves and adverse selection. A spread that widens in real time is an early sign that liquidity is thinning, which often precedes a sharp move or a liquidation cascade.
Why is the spread quoted in basis points?
Basis points normalize the spread for price. One basis point is 0.01%, so a spread quoted in bps (spread divided by mid price times 10,000) is comparable whether the asset trades at $3 or $60,000. A raw dollar spread cannot be compared across assets; a bps spread can, which is why MarketTrace reports spread_bps rather than a dollar figure.
Why does MarketTrace use a single-venue spread instead of a consolidated one?
Because a consolidated best bid and best ask taken across venues can show a false negative spread. Venues are never perfectly time-synced, so for a moment the best bid on one venue can be higher than the best ask on another — a crossed book that no single trader could actually execute. MarketTrace reports the tightest real spread on any one venue, which is the genuine, executable cost of crossing the book.