If you trade on an exchange, sooner or later you’ll notice one thing: the price you buy at isn’t always the same as the price you sell at. There’s always a small difference, and it has a name: the bid-ask spread.

Basically, when you exchange assets on an exchange, the price depends on supply and demand. But beyond the price, there are other factors that matter: trading volume, market liquidity, and the type of order you use. You don’t always get the price you want, and understanding how the bid-ask spread and slippage work helps you avoid surprises.

The bid-ask spread is simply the difference between the highest price a buyer offers (bid) and the lowest price a seller asks (ask). If you want to buy right away at the market price, you agree to pay the seller’s lowest ask price. If you want to sell immediately, you receive the highest bid price from the buyer. Highly liquid assets like Bitcoin have very tight bid-ask spreads, while less-traded assets have wider spreads. This is because there’s a lot of competition among traders who are trying to profit from this gap.

Market makers play an important role here. They provide liquidity by buying and selling at the same time. They can offer to buy BNB at $350 and sell it at $351 at the same moment, earning a $1 spread. It seems small, but with high volumes throughout the day it becomes significant.

To compare bid-ask spreads across different cryptocurrencies, you need to look at them in percentage terms. The formula is simple: (bid price − ask price) divided by bid price, multiplied by 100. Let’s take BIFI as an example: if the bid is $907 and the ask is $901, the spread is $6, which corresponds to about 0.66%. Bitcoin, on the other hand, with a $3 spread, has a bid-ask spread of just 0.0083%. This tells you right away that Bitcoin is far more liquid than BIFI.

Now, there’s another phenomenon you need to know: slippage. It happens when your order gets filled at a price different from what you expected. Imagine you want to buy a large quantity at $100, but the market doesn’t have enough liquidity at that price. Then your orders will be executed at higher prices as you move up the order book. The final average price will be above $100, and this difference is slippage. In highly volatile markets or markets with low liquidity, slippage can exceed 10%.

The good news is that slippage isn’t always against you. Sometimes the price falls while you’re buying or rises while you’re selling, and in that case you profit. It’s not frequent, but it does happen in very volatile markets.

How can you minimize the problem? First, split your large orders into smaller parts instead of placing one massive order. Second, monitor the order book carefully before trading. Third, if you use a decentralized exchange (DEX), remember that transaction fees can offset the gains you would have achieved by avoiding slippage. Fourth, use limit orders when you can: you give up the speed of a market order, but you’re sure you won’t suffer negative slippage.

Some exchanges let you manually set a slippage tolerance, especially on DEXs like Uniswap. If you set it too low, the order might never execute. If you set it too high, other traders could front-run you with higher gas fees.

The final lesson is simple: when you trade cryptocurrencies, remember that the bid-ask spread and slippage will affect the final price of your trades. You can’t always avoid them completely, but awareness and smart strategies help you contain them. With small orders, the impact is minimal, but with large volumes, the average price per unit could be significantly different from what you expected. If you operate in decentralized finance, understanding these mechanisms isn’t optional: it’s fundamental knowledge you need to master in order not to risk losing money.