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Cryptocurrency spreads: everything you need to know to buy and sell without hidden fees
The spread in cryptocurrencies is an element to understand before buying or selling.
Table of Contents
What is the spread in crypto?
The spread refers to the difference between the buy and sell price on a trading platform . This price difference exists in all financial markets, but it takes on particular importance in the world of cryptocurrencies where liquidity , volatility , and the nature of exchanges vary considerably. The cryptocurrency spread therefore represents the hidden cost paid by the buyer and seller on each transaction price of an asset needs to move in the right direction to be profitable.
The spread is calculated as the difference between the buy price (ask) and the sell price (bid) . For example, if the buy price of Bitcoin is €50,000 and the sell price is €49,950, the spread is €50. Therefore, every time you buy a cryptocurrency like BTC , you pay the higher price, and when you sell, you receive the lower price. This margin goes to the platform or market maker who ensure market liquidity.
Here's what you need to know about the spread: it directly impacts the profitability of each transaction and can represent a hidden cost in some cases.
Why is there a spread on cryptocurrencies?
- Market liquidity: The more a cryptocurrency is traded (like Bitcoin buyers and sellers there are . A liquid market exhibits tight spreads . Conversely, a or obscure cryptocurrency will have a huge spread buy and sell orders .
- Market volatility: Cryptocurrency volatility is pushing market market maker to widen spreads to protect themselves against sudden price fluctuations. market maker , and their model relies on a commission, which is the difference between the selling and buying prices.
- Hidden fees: Some platforms incorporate a portion of their transaction fees into the spread rather than displaying them separately. This can make the spread less transparent.
Fixed spread and variable spread
- Fixed spread : the spread remains constant, regardless of market liquidity or volatility
- Variable spread : the spread fluctuates according to market liquidity and market volatility .
How to avoid or reduce the spread in crypto?
To minimize the impact of the spread when buying or selling cryptocurrencies , here are the key points to remember:
- Favor platforms with high liquidity (the higher the volume, the lower spread
- Avoid buying or selling during periods of high volatility .
- Use limit orders rather than market orders to control the buy or sell price.
- Favor well-established cryptocurrencies… like Bitcoin or Ethereum , which benefit from tight spreads .
A wide spread can make a transaction unprofitable, especially for small amounts or low- liquidity cryptocurrencies liquid a cryptocurrency spread will be.
The free guide will walk you through your first steps, from buying your first cryptocurrencies on a centralized platform with a tight spread (1% on the simplified platform) to creating a wallet and making a transaction on the blockchain . It is available by filling out the form below.
To gain a deeper understanding of how the monetary system and Bitcoin work, and to develop a more complete mastery of the tools, finance and legal constraints (taxation, inheritance, etc.) , we invite you to discover the BSM program .
It includes detailed video tutorials on centralized exchanges (including methods for reducing fees), software wallets, hardware wallets, and best practices. The program can be accessed from the header or the link above.
Spreads and hidden fees: what beginners need to know
The spread isn't the only cost to watch out for. Platforms apply transaction fees in addition to the spread . Some platforms display a spread that can vary depending on liquidity and volatility , but they also apply fixed or variable fees. Here's what you need to know about the spread : always compare the buy and sell price of an asset across multiple platforms to avoid unpleasant surprises.
The actors in the spread: market maker, traders and platforms
- Market market maker create liquidity by constantly offering bid and ask prices . They profit from the spread .
- Traders and investors seek to buy at the best purchase price and sell at the best selling price .
- Platforms can widen the spread to increase their margin, especially on illiquid cryptocurrencies .
Summary: Everything you need to know about crypto spreads
- The spread is the difference between the buy price and the sell price of a crypto .
- It is influenced by platform liquidity , volatility , and pricing policy .
- A wide or gigantic can make a transaction unprofitable.
- To minimize the impact, favour platforms , use limit orders and compare spreads .
- The spread represents a hidden cost for the investor and must be taken into account in any crypto trading or buying strategy .
By understanding cryptocurrency spreads , you can become a future trading and avoid pitfalls that can reduce the profitability of your investments liquid a cryptocurrency is , the tighter spread buy or sell at a current price that reflects the actual market. Don't hesitate to compare spreads and choose the platform that offers you the best liquidity and transparency .
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Yoann
Trained as an engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future, I am participating in its democratization by developing Crypternon.