✔️ Information reviewed and updated in December 2023 by Eduardo López
If you are thinking of investing in cryptocurrencies, you should know that there are very important terms to take into account such as Bid and Ask. And it is that knowing the terminology will make it much easier for you to operate, since this way you will not have to waste time looking for the terms in the dictionary.
Two of the most used are both Bid and Ask, which apply widely for a large number of assets in Trading, Forex, cryptocurrencies and more. That is why here we will explain what the Bid and Ask are about so that you can take it into account.
✨What is Bid and Ask? ✨
The word Ask refers to the best buy offer while Bid is the term used for the best sell offer. Basically they refer to the best prices available to operate both when buying an asset and selling it.
When a buy-sell order is launched to the market there are two parties, the seller and the buyer. The price that the buyer gives corresponds to the Ask while the sale price to the Bid. The difference that exists between both the Bid and the Ask is the so-called Spread.
✨Registration in the order books✨
Every order generates a record in the order book. In this case, el Bid is recorded on sell orders by noting the best price or Best Bid at the top of the book. In this way, the price is set and controlled.
The same happens with the Ask, which is recorded in the purchase book by placing the Best Ask or best Ask at the top of the book. Consulting this book can give you a good parameter to know at what purchase and sale prices the assets are trading.
✨ Changes in Bid and Ask✨
You should know that both the Bid and the Ask are not fixed, since they are changing and evolve as the asset and the market do. These terms are governed, like assets, based on supply and demand.
For example, when there is a very high demand for the asset, the sellers, logically, will seek to sell much more expensively and to the highest bidder. This will cause the sale price to increase and with it, the Bid will rise. This, as you can see, product of the demand.
The same happens with the opposite case, when the supply is so great that it exceeds the demand of buyers. This causes prices to fall, since having an excess, buyers will seek to buy cheap. Thus, the price will fall and with this the Ask will reach a minimum due to excess supply or low demand.
So it is important to understand that both the Bid and the Ask are governed by the behavior of the market, supply and demand. Keeping this in mind when investing will allow you to operate much more efficiently and make better financial decisions.