Learn / Beginner · Markets and Risk
What is a price?
Beginner · Markets and Risk · about 3 min read
A crypto price is what buyers and sellers are agreeing to trade at on a particular platform right now, and because every platform has its own buyers and sellers, there is no single official price.
How it works
- The order book. Each trading pair on an exchange, such as BTC/USD, has an order book: a public list of open buy and sell orders that changes as people place, cancel and fill them.
- Bid, ask and spread. A buy order is a bid and a sell order is an ask. The best bid is the highest price a buyer is offering, and the best ask is the lowest price a seller will accept. The gap between them is the spread. Imagine a best bid of $100.00 and a best ask of $100.10: the spread is $0.10.
- Trades set the price. Each platform sets its price from its own trades, so the price you see is based on what is happening on that platform.
- Prices on data sites are averages. CoinGecko, for example, collects prices from many exchanges, leaves out thinly traded markets and prices that stray far from the rest, then weights what remains by trading volume, so busier exchanges count for more.
Keep in mind
- The same coin can show different prices on different platforms. Each has its own order book, its own number of traders and its own fees. Traders who buy on the cheaper platform and sell on the dearer one tend to close gaps quickly, but fees, transfer times and delays limit how much of a gap they can use.
- The price on a chart is not always the price you pay. A quote on a buying platform can include fees, the spread and any currency conversion, so check the total before you confirm.
- When a market is thin, with few orders on the book, one large order can push the price it is filled at, an effect called slippage.
- General information, not financial advice.
Key terms
Order book, bid, ask, spread, liquidity, slippage, volume-weighted average.
Module quiz
3 questions. Tap an answer to see if you are right and why. Get 2 right to complete the module.
1. What does an order book show?
It is the public list of bids and asks waiting to be filled.
2. What is the spread?
It is the difference between the highest buy offer and the lowest sell offer.
3. Why can the same coin show different prices on two platforms?
Each platform sets its price from its own trades, and fees and liquidity differ too.