Charts like this allow traders to estimate how susceptible the price is to buy or sell orders and gauge likely support and resistance levels. Market makers get their name from the fact that their combined limit orders make up the entire order book, which represents the state of the market. If ‘crossing the spread’ means paying the bid-ask spread, then someone must have profited. But who? Very simply put, this profit goes to the traders who use limit orders, known as market makers. Conversely, traders who use market orders are called market takers, or price takers.

There are also crypto-to-crypto pairs, such as BTC/USDT and ETH/BTC.

An Overview for Beginners. It then subtracts the corresponding fiat currency from the user’s account. Many exchanges support crypto-fiat pairs, most often in US dollars. There are also crypto-to-crypto pairs, such as BTC/USDT and ETH/BTC. What Are Trading Pairs? Once submitted, the exchange automatically matches the order with the lowest-priced offer(s) in its system. Once a user has deposited fiat currency onto the exchange, they are ready to execute their first trade by placing an order to buy their preferred cryptocurrency. A trading pair shows which currencies can be exchanged for one another. For example, BTC/USD allows users to buy or sell Bitcoin with US – Going Listed here – dollars.

For example, say a user wishes to buy 4 BTC at market: The order book may require them to first buy a portion at a certain price, then the remainder of their order at another price. Why does the bid-ask spread exist? Recall the example above, when the user bought 4 BTC at market: They had to buy the BTC on offer at the price that other traders had specified. If that same user had instead placed a limit order to buy 4 BTC, they might have specified a lower price at which to buy BTC. A bid-ask, or bid-offer, spread is the difference between the lowest-quoted ask and the highest-quoted bid.

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We can see that market orders are used by traders who demand immediate liquidity, paying the difference between the bid and ask price. In financial markets, using a market order is called ‘crossing the spread’. Thus, the bid-ask spread represents the price of liquidity. Coming back to the above example, where our hypothetical trader bought 4 BTC: Let’s say the order book changed after the trade, since the limit order was filled.

What Is a Crypto Exchange? There are also other types of exchanges, called token swappers, where one can buy or sell at prices determined by an algorithm. A cryptocurrency exchange is a marketplace where traders come together to buy and sell (e.g., trade) cryptocurrencies or other digital assets at specific prices. On an exchange, a larger number of users gathered in one place allows for more liquidity and better prices. Exchanges exist as a location where traders can transact without the need to find a buyer or seller willing to trade with them.