Crypto Liquidity Glossary — Depth, Spread, Slippage Terms Defined

The order book

Order book — The live list of unfilled buy and sell orders for one trading pair. Bids sorted highest price first, asks lowest price first.

Bid — A buy order: the price someone will pay. The best bid is the highest of them.

Ask (offer) — A sell order: the price someone will accept. The best ask is the lowest of them.

Midpoint — (best ask + best bid) / 2. The conventional reference price. Not a price you can trade at — it is the theoretical centre between the two prices you can.

Price-time priority — The rule matching engines use to rank resting orders: better prices first, and among equal prices, earlier arrivals first.

Resting order — An order sitting on the book waiting to be filled, as opposed to one that executed immediately.

Level — One price point on the book, holding the combined quantity of all orders at that price.

Measuring liquidity

Liquidity — How much of an asset can be bought or sold without materially moving its price. Measured from resting depth and spread, not from historical volume.

Depth — The total quantity resting near the current price, usually measured as cumulative quantity within a band of the midpoint. Determines how large an order can execute before moving the price.

Cumulative depth — Depth accumulated outward from the top of the book, level by level.

Spread — The gap between best bid and best ask. (best ask − best bid) / midpoint × 100 as a percentage. The immediate round-trip cost of trading at market.

Effective spread — The spread actually experienced at a given order size, calculated from the average buy and sell fill prices rather than the top of the book. Frequently far wider than the quoted spread.

Depth chart — A stepped area chart plotting cumulative depth: price horizontally, cumulative quantity vertically, bids left of the midpoint and asks right.

Volume — The total quantity traded over a period. Backward-looking, and distinct from liquidity. Can be manufactured by parties trading with each other.

Execution

Market order — An order executing immediately at the best available prices, prioritising certainty of execution over price. Exposed to unbounded slippage.

Limit order — An order specifying the worst acceptable price, prioritising price over certainty. Eliminates negative slippage; may not fill.

Marketable limit order — A limit order priced to cross the spread, executing immediately but with a hard bound on the worst price accepted.

Slippage — The difference between the price expected on submission and the average price at which the order executes. (average fill − expected) / expected. A consequence of book depth, not a fee.

Positive slippage — Filling better than expected, when the market moves in your favour between submission and execution.

Slippage tolerance — A configured maximum acceptable slippage, above which an order is cancelled rather than executed.

Partial fill — An order filled for less than its full quantity, because insufficient opposing size was available.

Price impact — How far an order moves the price. The same phenomenon as slippage, described from the market's perspective rather than the trader's.

Participants

Maker — A participant whose order rests on the book and adds liquidity. Usually charged a lower fee, because resting orders are what make a market tradable.

Taker — A participant whose order immediately matches a resting order and removes liquidity. Usually charged a higher fee.

Market maker — A participant who quotes both sides of a book continuously, profiting from the spread while carrying and actively managing inventory risk.

Liquidity provider (LP) — In an automated-market-maker system, a participant who deposits assets into a pool and earns a share of trading fees, with exposure to impermanent loss rather than inventory management. Distinct from a market maker: the pool prices trades algorithmically and no quoting decisions are made.

Impermanent loss — The difference in value between assets held in an automated-market-maker pool and the same assets held directly, arising when their relative prices change.

Inventory risk — The exposure a market maker carries from holding a position in the asset it quotes.

Market quality and manipulation

Liquidity trap — A market that can be entered but not exited at any reasonable price, typically because one side of the book is empty.

One-sided book — A book with depth on one side and little or none on the other. Buying is easy; exiting is not.

Wall — A large concentration of orders at one price level, appearing as a vertical step on a depth chart. May be genuine depth or may be withdrawn on approach.

Spoofing — Placing large orders with no intention of filling them, to create a false impression of supply or demand, then cancelling. Market manipulation, illegal in regulated markets.

Wash trading — Trading with oneself to generate apparent volume without genuine transfer of risk.

Fragmentation — Liquidity split across multiple pairs or venues, leaving each individual book thinner than the total suggests. Depth cannot be combined across books in a single order.

Depth imbalance — Unequal depth between the bid and ask sides. Weak evidence about resting positioning, not a prediction of direction.

Launch

Bootstrapping liquidity — Deliberately providing the initial depth for a newly listed pair, since an order book starts empty.

Replenishment — Replacing depth consumed by trading. A book that empties and is not refilled has effectively closed.

Opening price — The price at which a new pair begins trading. Best based on an existing market reference rather than a target valuation.

Concurrency multiplier — A planning factor (commonly 3–5×) applied to expected order size, accounting for several participants trading simultaneously at launch.

Liquidity Glossary — Order Book and Market Structure Terms