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What is an Order Book?

The order book is a written, real-time representation of all buy and sell orders active at the current moment and organized by price level. It illustrates how much buyers are willing to spend (Bid price) and how much sellers are willing to accept (Ask price). The difference between the Bid and Ask prices is called a Spread.

The order book indicates the liquidity of the market. If the buyers are setting the prices too low while the sellers are placing them too high, the spread will increase, and the market liquidity will decrease. 

Example: The Ask price (set by sellers) for BTC is $20,000, and the Bid price (set by buyers) is $19,000. In this case, the spread will be $1,000, and since the middle ground is not reached, the liquidity will decrease.

On the other hand, if the buyers are offering a higher price than the one set by the sellers, the Bid and the Ask prices will overlap, creating a positive spread. The latter will provide traders with the opportunity to open/close an active trade at a better rate than initially anticipated. 

Example: The Ask price (set by sellers) for BTC is $20,000, and the Bid price (set by buyers) is $21,000. In this case, the order will be executed at a BTC price of $21,000, creating a positive spread of $1,000.



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