Published on Nov 25, 2021

Ask Price

icon-alt1 Min

One of the most important variables in the operation of any exchange is the “ask price”.

It is part of the two-way "bid and ask" price quoting method. The buyer sets the bid price, which is the maximum amount they are willing to pay for the item in the base currency. When executing an instant transaction on an exchange (known as a market order), buy and sell orders are matched with the most advantageous comparable prices — for example, A buy order is matched with the lowest ask price, and a sell order is matched with the highest bid price. Assume you want to exchange a fictitious currency. The coin's market rate is $100/$120. This means you'll have to pay $120 to purchase the coin, while a seller will get $100 if they sell one. The difference between the ask and bid prices is described as the spread. This is where the exchange generates money and covers its operating expenses.

Spreads are also directly related to market liquidity, or how easy it is to purchase or sell an item. Because there are more people eager to trade in highly liquid markets, spreads are often lower, whereas poor liquidity is frequently accompanied by wider spreads. Spreads are affected by changes in transaction costs, for example. Several exchanges market themselves depending on their average spread size in an attempt to draw traders away from competitors.

Share this blog on

Subscribe to our Newsletter

Get the best updates from the Web3 ecosystem & The Dapp List in your inbox every week 👇