Welcome to Deep Dive!
This week, we explore Bid-Ask spreads on centralized exchanges—a key yet often overlooked liquidity indicator. Using distribution analysis, we’ll identify exchanges, stablecoins, and pairs with the tightest/widest spreads in today’s liquidity-scarce market.
Key Takeaways:
- USDT spreads are crypto’s tightest.
- USD spreads lag behind (e.g., Binance.US struggles).
- Spread volatility dropped in 2023 vs. 2022.
- Coinbase’s BTC spreads vary more than ETH.
Spreads Refresher
The Bid-Ask Spread reflects the gap between buyers’ highest bids and sellers’ lowest asks. Tight spreads indicate high liquidity; wide spreads signal risk or volatility. Market makers adjust spreads during price swings to hedge risk.
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Data Insights
Methodology: Box-and-whisker plots visualize spread distributions. The "real spread" (in basis points, bps) allows cross-asset comparisons.
USDT Spreads
- BTC/ETH: Tightest spreads on Binance.
- SOL-USDT: Widest range (Binance’s SOL liquidity lags).
- DOGE: Tighter than XRP/SOL/ADA.
- Huobi/Kucoin: Most outliers (Huobi); Kucoin excels for altcoins.
Binance vs. Competitors:
- Binance leads in BTC/ETH liquidity.
- OKX’s BTC outlier skews higher.
- Huobi’s ETH spreads are weakest among peers.
Volatility Trend: USDT spread variance stabilized post-2022 crises, unaffected by March 2023’s US banking turmoil.
USD Spreads
- Scale: 3× wider than USDT pairs.
- Binance.US: Highest spreads (liquidity crunch).
- DOGE-USD: Kraken/Coinbase rival ETH; Binance.US underperforms.
Notable Trends:
- Kraken’s BTC spreads are industry-low.
- Coinbase’s BTC range exceeds ETH.
Stablecoin Rankings:
- USDT
- USDC (beats USD/BUSD)
- TUSD (tight BTC/ETH but wide alts)
- DAI (widest, low adoption).
FAQ Section
Why do spreads widen during volatility?
Market makers hedge against price swings, reflecting perceived risk. Sustained width hints at expected ongoing volatility.
Which stablecoin offers the best spreads?
USDT dominates, but USDC is a close second for USD pairs.
How does Binance.US compare globally?
It trails in USD liquidity due to weaker market maker participation post-2023 banking crisis.
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Summary Cheatsheet
Use Kaiko’s order book data to minimize trade costs:
- Best BTC/ETH spreads: Binance (USDT), Kraken (USD).
- Avoid wide spreads: Binance.US (USD), Huobi (outliers).
- Stablecoin priority: USDT > USDC > BUSD/USD.
Data sourced from Kaiko’s real-time order books.