Order Book

Behind the order book's visible bids and asks sits a matching engine that continuously pairs incoming orders against the queue. Only limit orders, priced instructions to buy or sell at a specific level, actually populate the book; a market order simply executes against whatever liquidity is already resting there, without adding a new entry itself.

Bids are ranked from highest to lowest price and asks from lowest to highest, with the gap between the top bid and top ask known as the bid-ask spread. A narrow spread and thick order stacks at nearby prices signal a deep, efficient market where sizable trades can clear without moving the price much. A thin book, common on lower-volume altcoin pairs, means even modest orders can cause slippage or sharp price swings. Many trading platforms visualize this as a depth chart, plotting cumulative bid and ask volume as two curves that meet at the current price.

Traders read order books for more than execution: large clusters of resting orders, sometimes called walls, can hint at support or resistance, though they can also be spoofed, placed and then cancelled to manipulate sentiment rather than to actually trade. This is one reason regulated exchanges monitor for spoofing and wash trading. Not everything shows up on the book either; iceberg orders reveal only a small slice of their true size, and OTC or dark-pool trades bypass it entirely.

This "central limit order book" model, long standard on centralized exchanges, has increasingly appeared on-chain too, competing with automated market maker designs like those used across much of Ethereum decentralized finance, particularly for traders who want tighter execution on large orders.