The Bid Ask Spread (Part II) - Steemit Crypto Academy- S4W3- Homework Post for @awesononso

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Am gladdened once again for yet another opportunity of this wonderful edition by the cryptoacademy. From the lecture offered by Professor @awesononso, reading through this lecture series have given me a better insight on the Bid Ask Spread (Part II). To this, I will be writing based on the task given by the Professor.

Define the Order Book and explain its components with Screenshots from Binance.

The Order book just as the name implies is a book that contains all the open order (be it buy or sell) placed for a particular asset at a particular time. It displays the bid side and also the ask side. The bid side is denoted with a green colour while the ask side is denoted with a red colour showing the different prices arranged it accordance.

The bid side displays the buy orders and their different prices, amount and total cost while the ask side displays the sell orders and their different prices, amount and total cost.

The Order book is very important as it helps traders or investors to be able to view the transactions made on the crypto sphere. It makes transactions on the cryptocurrency world very transparent. It is a tool that aids trader and investors to determine the market direction of an asset (if it is trending to bearish or bullish), to determine the resistance and support levels of an asset as well as a good indicator for the liquidity of an asset.

Who are Market Makers and Market Takers?

Market makers are those people that places a Limit Order in the market. They place a specific price at which their asset can be bought or sold. They don’t place an order at the current market price of the asset.

Market takers are those people that places a Market Order in the market. They place an order at the current market price of the asset. They are ready to buy an asset at the current market price and also sell an asset at the current market price.

What is a Market Order and a Limit order?

Market Order is a type of order that can be placed for a particular asset to be bought or sold in the current market price of the asset.

Limit Order is a type of order that can be placed for a particular asset to be bought or sold by an investor or trader at a price he/she is willing to sell or buy. He/she does must not have to follow the current price value of the asset in the market he/she wants to buy but rather makes a buy and sell order at a price level he/she is willing to.

Explain how Market Makers and Market Takers relate with the two order types and liquidity in a market.

Market makers are people that places limit orders. They place an order at a specific price that they are willing to buy or sell an asset and thus by doing so, while the market takers are people that places market orders. They place an order with respect to the current market price of the asset. You get to see that the market orders will be filled faster than the limit order. By the time the market order now corresponds to the limit order that was placed, the market takers now accepts the price that was placed by the market makers and both the limit orders and the market orders can be filled. We now see that the market makers makes it possible for the market takers to take liquidity.

Place an order of at least 1 SBD for Steem on the Steemit Market place by

a) accepting the Lowest ask. Was it instant? Why?

Yes, it was instant. When accepting the lowest ask, the order filled immediately, it means that the lowest ask throughout the transaction period was maintained.

b) changing the lowest ask. Explain what happens.

When the lowest ask is changed, the order placed would be added to the order book until the ask price is achieved.

Place a TRX/USDT Buy Limit order on the Binance exchange for at least $15. Explain your steps and explain the impact of your order in the market. (Give Screenshots).

I had an insufficient fund, so I could not finish the complete the transaction

Place a TRX/USDT Buy Market order on the Binance exchange for at least $15. Explain your steps and explain the impact of your order in the market. (Give Screenshots of the completed order).

I had an insufficient fund, so I could not finish the complete the transaction

Take a Screenshot of the order book of ADA/USDT pair from Binance on the day you are performing this task. Take note of the highest bid and Lowest ask prices:

a) Calculate the Bid-Ask.

Given, Bid price = $ 2.399
Ask price= $2.400
Ask price - Bid price = Bid-Ask spread
Inputting the values; $ (2.400 – 2.399) = $0.001
Therefore, the Bid-Ask spread = $0.001

b) Calculate the Mid-Market Price.
Mid-Market Price = (Bid Price + Ask Price)/2
The Mid-Market value would be = (2.400 + 2.399)/2
=4.799/2
=2.3995 USDT.