Introduction

Continuing with my sequence of posts on technical analysis, today I will expand on the topic of the bid-ask spread, considering that it is important to highlight that in any financial market, whether physical or virtual, imbalances or differences between supply and demand are generated.

These imbalances are usually considered as the kinetic force that gives life to the markets, basically because when differences are generated between supply and demand, conditions are created that allow both buyers and sellers to negotiate.

It is to be understood that the bid-ask spread is an extremely important determinant of the prices that are established in a negotiation within the cryptocurrency market.

Source: Academy.Binance

This is because the bid-ask spread usually significantly affects the return for or against any cryptocurrency, hence, knowing how to correctly estimate the bid-ask spread is of utmost importance for cryptocurrency investors.

Another important element to highlight is that the bid-ask spread serves as a parameter to know or project the illiquidity of the financial markets, in addition to the magnitude of the bid-ask spread.

This is basically because they can enhance the economic growth of a particular cryptocurrency, therefore, in the specific case of those who buy / sell cryptocurrencies, knowing the differential between supply and demand would help us to take advantage of the operations we are executing.

In the next post, we will talk a little about positive slippage and negative slippage with illustrations of prices that occur between the bid-ask spread.

SOURCES CONSULTED

➊ Financial Pipeline Staff The Importance of Bid-Ask Spread. Link

OBSERVATION:

The cover image was designed by the author: @lupafilotaxia, incorporating image: Source: Goodreturns

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