How does the spread affect bitcoin price movements?

1 answers

• Nov 26, 2021 · 3 years ago
  The spread is a key factor that influences bitcoin price movements. It refers to the difference between the highest bid price and the lowest ask price in the market. A wider spread indicates a larger difference between the buying and selling prices, which can lead to higher transaction costs for traders. This can result in reduced trading activity and lower liquidity in the market. As a consequence, even small buy or sell orders can have a significant impact on the price, causing increased volatility. On the other hand, a narrower spread indicates a smaller difference between the bid and ask prices, which can result in lower transaction costs and higher liquidity. This can contribute to a more stable price movement as traders can easily execute trades at desired prices. Therefore, the spread plays a crucial role in shaping bitcoin price movements and understanding market dynamics.
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