Cryptopedia · Market microstructure

Order book & liquidity depth

The order book is the live ledger of resting limit orders — the bids waiting to buy and the asks waiting to sell at each price. Its shape, or liquidity depth, determines how far a given trade moves price.

Bid, ask, spread

The highest bid and lowest ask are the best available prices; the gap between them is the spread. A tight spread and thick book mean a liquid market where trades fill near the quoted price. A wide spread or thin book means the opposite.

Depth and slippage

Depth is how much size rests at each price away from the mid. A large market order eats through successive levels, filling at progressively worse prices — that gap between the expected and realized fill is slippage. Thin depth amplifies both slippage and the risk of a fast move.

Why visible liquidity is not guaranteed

Resting orders can be cancelled or repriced in an instant, and some size is deliberately hidden or spoofed. So a wall of visible liquidity signals intent, not a floor — it can pull away exactly when it is tested. Read the book together with executed flow.

Order book & liquidity — FAQ

What is the bid-ask spread?

The spread is the gap between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). A tighter spread generally indicates a more liquid market.

What is slippage?

Slippage is the difference between the price you expected and the average price you actually got, caused by a market order filling across multiple order-book levels.

What is liquidity depth?

Depth is the amount of resting orders available at each price level away from the mid; deeper books absorb larger trades with less price impact.

Can order-book liquidity disappear?

Yes. Resting orders can be cancelled or moved instantly, and some are spoofed, so visible liquidity signals intent rather than a guaranteed level and can vanish when tested.

Order-flow imbalance

Order-flow imbalance measures whether aggressive buyers or sellers are dominating executed trades. What it means, how it's read, and why it precedes short-term moves.

Liquidation cascade

A liquidation cascade is a self-reinforcing chain of forced liquidations that accelerates a price move. How it forms, why leverage fuels it, and how to spot the setup.

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