What determines the "spread" in stock/crypto markets, and how to circumvent it?

Question

I'm looking for some pointers to learn more about how the crypto market works.
Specifically, I'd like to know more about why the latest price listed against the graph UI on coinbase doesn't correspond to the price when I actually click on buy/sell.
For example, if the price of eth is x and you want to buy 10 eth, the price per eth is usally x + <spread> , contradicting the latest price shown against the graph (disregarding transaction fees).
Per this post, I understand that it's because the graph price just displays the cheapest asking price across all amounts of eth. When buying a specific quantity, the price charged is bound to be different since the quantity isn't going to correspond to that of the cheapest ask price.
I have two questions:

Where can I learn more about this process of setting ask prices? How are these ask prices set, and who decides them? Can I propose a price myself?

I'm aware that people use coinbase pro to circumvent this issue. What are the key things I need to know to use this platform?

Fattie · Answer

the latest price listed against the graph

That is almost certainly the last sale price
(If it's not, they are idiots.)  All market price graphs show "the last price that happened."

For example, if the price is ...

Market instruments do not have a "price".  eth has no "price".  An Apple share has no "price". This is a very common misconception.
Consider the house you own.  Does it have "a price"?  No. You may guess what you can get for it.  You may offer it at a certain figure.  Someone may offer you something for it.  You may sell it at auction. But is has no "price" - it is a market instrument.

Can I propose a price myself?

Precisely. Every single day when someone of millions of people sets an order to buy (or sell) a share of Apple at a certain price, that's the price of the bid or ask.
(Note that if you buy (or sell) at "market", it simply means "gives me the next bid or ask in line, I don't care exactly how much it is".)
It sounds like with "CoinbasePro" indeed that precisely allows you to make bid/asks. Enjoy!

What determines the "spread" in stock/crypto markets, and how to circumvent it?

One Answer

Add your own answers!

Ask a Question