The difference between the market value and the selling value (also known as the “spread”) raises a lot of questions. Does Bitladon just keep a part for itself or what? In this article we will explain where this difference comes from and how it works exactly.
Where does the difference come from?
Bitladon buys and sells its coins on various international exchanges.
On the exchanges there is a buy and a sell price for which we can buy or sell these coins. We call the difference between these two the "spread". The spread can be different at any given moment.
This is usually a difference of a few minutes, but can even be seconds depending on the coin.
There is a balance point where orders from the buyers and sellers meet. At the same time, there is always a gap, which fluctuates as trading orders on the other side are resolved, causing the total price to go up or down.
Sellers understandably want to sell as high as possible and buyers want their price to be as low as possible. This forms a gap which is called ''spread''.
That is why the price you can buy at, is higher than the price you can sell at.
If there is an overlap between the two sides of the gap, the overlapping trade order is resolved immediately and, you probably guessed it… our price gap reappears! You will see this gap - called the "spread" - on every exchange in the world, whether in crypto or stocks or any other asset trading on exchanges. The lower price is known as the “bid price” and the higher is the “ask price”. Price spreads are therefore the difference between the highest buy order and the lowest sell order on any given exchange.
Doesn't Bitladon make money from this?
No, we do not earn anything from this except for the transaction costs that you pay on your trades.
Why is the difference between market value and selling value so great for some currencies and so small for others?
Because the spread depends on the trade. A currency like Bitcoin has a billion dollar trade, where other coins do not even reach a million in 24-hour trading. As a result, the order book is also a lot smaller and the difference can be a lot bigger when you trade with larger amounts.
Why is this difference not on an exchange with live order books?
We are a broker, so we buy and sell our coins for you on different exchanges. With us it works slightly differently than with an actual exchange because there you have to put your order in the order book yourself. The risk you have on an exchange is that your order will not (not immediately or not at all) be filled, in that case you will lose money. In our case as a "broker", you press "sell" and that risk is for us. We put the order in at a place where we can assure it will be filled. That's where the spread comes from and explains why it is a little bit higher at a broker.
An example:
We will refer to the coin in our example as coin A.
The selling value shown on the portfolio page, or on the coin page, is an estimate. This price is based on the first line from the order book. We know the price of 1 coin A to buy and sell. But to calculate exactly what you will get when you sell all your coins, we have to view the live order book, which is a very difficult process for the computer, so this is only done once you enter the amount in the calculator. You will also notice that during the calculation, the system shows a slight delay for a second.Imagine that, just for this example, you want to sell 30 x Coin A.
In the order book there are 10 x Coin A available € 0.29 euro. So if you were to sell 10, you would get that price (10x € 0.29). The next line in the order book has 10 x Coin A for € 0.28 Euro, the next 10 x Coin A for 0.27 Euro. So if you were to sell 30 x Coin A, you would not get 30 x € 0.29 euros, but you would get 10 x € 0.29 euros, 10 x € 0.28 euros and 10 x € 0.27 euros.
In the example above, the shown rate is 0.29 euros, but that is if you sell 1 coin. If you sell more, that price will drop. That difference is smaller with Bitcoin than with other coins for example, simply because there is more trade.
The smaller the currency (based on trade), the greater the difference. If you fill in the calculator, you will see exactly what it is worth. One solution is to sell it in smaller steps. This difference is always there, not only in crypto but also on stock exchanges and with gold trading.
