Are bid and ask spreads narrower in highly liquid cryptocurrencies?

3 answers

• Feb 18, 2022 · 3 years ago
  Yes, highly liquid cryptocurrencies generally have narrower bid and ask spreads compared to less liquid ones. This is because high liquidity means there are more buyers and sellers in the market, which leads to tighter spreads. When there are more participants, it becomes easier to match buy and sell orders, resulting in smaller spreads. So, if you're looking for narrower bid and ask spreads, it's advisable to trade in highly liquid cryptocurrencies.
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• Feb 18, 2022 · 3 years ago
  Definitely! When a cryptocurrency is highly liquid, it means there is a large volume of trading activity happening, which creates a more competitive market. In such a market, the bid and ask spreads tend to be narrower because there are more buyers and sellers willing to trade at similar prices. On the other hand, less liquid cryptocurrencies may have wider spreads due to lower trading volumes and fewer participants. So, if you want tighter spreads, go for highly liquid cryptocurrencies.
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• Feb 18, 2022 · 3 years ago
  According to a study conducted by BYDFi, highly liquid cryptocurrencies indeed tend to have narrower bid and ask spreads. This is because high liquidity attracts more market participants, including both buyers and sellers, which leads to increased trading activity and tighter spreads. In contrast, less liquid cryptocurrencies may have wider spreads as there are fewer participants and less trading volume. Therefore, if you're looking for narrower spreads, it's recommended to focus on highly liquid cryptocurrencies.
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