Steemit Crypto Academy [Beginners' Level] | Season 4 Week 1 | The Bid-Ask Spread for professor awesononso

The screenshot above shows the spread of solana and bnd coins. While the red wave represents the ask-price,the green wave stands for the bid-price.The space in between the waves represents the spread digital differential value.In other words the higher the value of the spread, the wider the space in-between the waves.

The bid-ask spread significantly affect stock returns.When there are fewer ask-price than bid-price,the spread widen significantly and thus illiquid market is arrived.If there are much traders with large ask-price which sub-ordinates the large amount of bid-price for thesame coin in a crypto market,the market is said to have much liquidity thus a little spread. Therefore the major importance of the Bid-Ask Spread is that it affects the liquidity of a cryptocurrency market either positively or negatively.

a)Bid-Ask Spread=ask-price–bid-price

Therefore
Spread= $5.20–$5
Spread=$0.20
b)%Spread=(Spread/ask-price)×100
Therefore
%Spread=(0.2/5.20)×100
%Spread=(0.038461538)×100
%Spread= 3.846
=3.85%

Question 2
a)Bid-Ask Spread=ask-price–bid-price
Therefore

Spread= $8.80–$8.40
Spread=$0.40
b)%Spread=(Spread/ask-price)×100
Therefore
%Spread=(0.4/8.80)×100
%Spread=(0.045454545)×100
%Spread= 4.545
=4.55%

Slippage(Positive and Negative)

A slippage is said to occur when there is a difference in the ask-price and bid-price at which a market order was supposed to be executed.This differences can either favour the buyer or the seller simultaneously due to the high volatility of the cryptocurrency market.Either way it can be ascribed a positive or negative term depending on the party which was favoured during the trade

Using The Case Study Above

Mr Obi raised a bid order for 2 harmony ONE token at the bid-price of 20usdt while Mr Mbaku wants to sell 2 harmony ONE token at the ask-price of 20.5usdt

The bid-ask spread for the usdt can be calculated for 2 harmony ONE token thus
Spread=ask-price–bid-price
=20.5–20
=0.5usdt

If Mr Obi's buy order was executed at existing market order with a positive slippage of 2usdt
He would have purchased 2 harmony ONE token at the rate of 18usdt.At that point Mr Mbaku would experience a negative slippage for selling 2 harmony ONE token at a lower price 18usdt.

If on the other hand Mr Mbaku's sell order was executed at existing market order with a positive slippage of 2usdt.
He would have sold 2 harmony ONE token at the rate of 22.5usdt.At that point Mr Obi experienced a negative slippage for buying 2 harmony ONE token at a higher price of 22.5usdt.

Conclusion

Thank you very much for this lesson professor @awesononso
I am very glad to be your student.

Cc: @awesononso