First Mover: In the Cryptocurrency Markets, No Two Exchanges Are Alike

Even in super liquid cryptocurrency markets, such as USD and bitcoin trading pairs, the size and spreads of exchange order books can vary markedly.

AccessTimeIconJun 26, 2020 at 11:58 a.m. UTC
Updated Sep 14, 2021 at 8:56 a.m. UTC
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In the cryptocurrency markets, no two exchanges are alike. Even in major crypto exchanges, trading U.S. dollars for bitcoin can have fairly different order sizes and spreads, according to data compiled by aggregator CryptoCompare.

Average order sizes over the past week were quite varied, CryptoCompare found. Orders on Bitstamp averaged $3,424.11, the highest of major dollar to bitcoin (USD/BTC) pair exchanges. ItBit was second to Bitstamp at $2,874.17, with Kraken at $2787.68. Gemini’s average was in the middle of the pack at $1,438.31, followed by Coinbase at $1,113.15. Bitfinex was lowest, with an average order totaling $342.09. The average order of the six exchanges was $1,996.58.

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Average spreads between the highest bid offer and the lowest ask offer on an exchange order book also varied significantly. Data from CryptoCompare shows a few exchanges have a much larger daily price spread than others.

“This is derived from L2 order book data, without fee calculations, on top of this,” said Constantine Tsav, head of research for CryptoCompare. Level 2, or L2, order book data is a term for market information that includes the scope of bid and ask prices for a given asset, in this case USD/BTC.

Luxembourg-based Bitstamp, at $5.21 and New York-domiciled Gemini, at $2.38, have the largest average spreads in intraday trading, in this case CryptoCompare used a two-hour interval. Market spread is the gap between the highest bid and the lowest offer on the order book. Thus the gap is the difference between the price traders are willing to sell an asset and others are willing to buy an asset, and vice versa.

Average spreads on six large USD/BTC exchange
Average spreads on six large USD/BTC exchange

Chris Thomas, head of institutional trading for Swissquote Bank, doesn’t believe the spread discrepancy between some exchanges is bad – it just depends on the type of trader on the exchange. Traders looking to fill larger bitcoin orders on spot exchanges might choose Bitstamp, based on this data, since it has bigger average orders. Traditionally, traders look for tighter spreads.


"Whereas Bitstamp and Gemini have a relatively wide spread, the four other ones will use this to boast that they have the most liquidity and are ‘the best’ exchanges,” he said. “But they may only be prepared to support these very tight prices in very small sizes – for example, 0.25 or 1 bitcoin on both bid and offers.”

“One bitcoin on each side of the bid/ask is okay for retail, but it’s not ideal for institutional.”

Of course, traders aren’t just motivated to go to an exchange based solely on average order sizes and spreads.

A very fragmented marketplace exists for crypto exchanges in 2020, said Denis Vinokourov, head of research for cryptocurrency broker Bequant. “The tech stack across exchanges is not uniform,” Vinokourov told CoinDesk.“Some exchanges offer high frequency trading connectivity while others don't, some are more retail focused than others; with segmented geographical focus, numerous legal jurisdictions and various approaches to fiat on-ramps.”

Maxime Boonen, CEO of liquidity provider B2C2, says a trader at that size really just needs to decide which exchange has the best fee structure. “Frankly, all exchanges are more or less equal, the liquidity of the major cash exchanges is broadly the same for most intents and purposes.”

“The fees do vary; that's important, depending on how much you intend to trade,” he added.

The increased use of derivatives in the crypto market is also seeing more professional traders move away from spot trading, Boonen said. “Derivative exchanges are more liquid than cash exchanges,” he said.

One of the reasons why order averages might seem so low is many traders on these exchanges are just buying from time to time to hold (or “HODL”) bitcoin, Boonen told CoinDesk. “You can't get physical bitcoin from derivatives exchanges, it’s not appropriate for HODLing.”

Tweet of the day


Bitcoin watch

BTC: Price: $9,199 (BPI) | 24-Hr High: $9,333 | 24-Hr Low: $9,087


Trend: Bitcoin is flashing red at press time and may be heading for bigger losses in the short term. 

At press time, the cryptocurrency is trading around $9,200, representing a 0.5% decline on the day, according to CoinDesk's Bitcoin Price Index

On the daily chart, the cryptocurrency looks to have found acceptance under the 50-candle moving average (MA), a bearish development. Meanwhile, on the three-day chart, the five- and 10-candle moving averages have produced a bearish crossover, while the relative strength index has dived out of a 60-day-long descending channel, signaling a bullish-to-bearish trend change. 

Some indicators, like the daily chart's golden crossover and a bull cross of the 50- and 100-candle MAs on the three-day chart, do indicate the path of least resistance is to the higher side. These indicators, however, are based on backward-looking averages and often trap traders on the wrong side of the market.

Besides, technical traders have refused to step in over the past four weeks despite confirmation of the golden crossover. Such reticence is reflective of a weakening of bullish sentiment. 

All in all, the odds appear stacked in favor of a decline to support levels located at $8,630 (May 25 low) and possibly $8,300 (200-candle MA). On the higher side, $10,000 remains the level to beat for the bulls. 

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