First Mover: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle

Price point

Bitcoin was rising along with gold and U.S. stock futures early Friday as traders reacted to Federal Reserve Chair Jerome Powell’s plan to let inflation run hot in coming years as the economy heals from the coronavirus-induced recession.

The largest cryptocurrency, seen by some investors as a hedge against inflation, changed hands around $11,451, staying in the range between $10,900 and $12,400, where it has been stuck since late July.

In Asian markets, the Japanese yen jumped on haven buying after Prime Minister Shinzo Abe, who has pursued inflation-boosting policies, said he would resign due to an illness.

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Market moves

Getting in and out of a large bitcoin trade on cryptocurrency exchanges like Binance or BitMEX isn’t costing as much as it used to. That might be a healthy sign that digital-asset markets are maturing.

At Binance, the world’s biggest cryptocurrency exchange by trading volume, the daily average spread between buy and sell orders on bitcoin futures for $10 million quote size declined to a record low of 0.25% on Monday, according to data provided by research firm Skew. The spread, which typically narrows as an exchange’s order book depth increases, spiked to 7.95% during the March crash but dropped shortly after. It has been in a declining trend ever since.

The so-called bid/offer spread is the difference between the best available price to sell or buy something in a market. It essentially represents liquidity – the degree to which an asset can be quickly bought or sold on a marketplace at stable prices.

A narrower spread implies a deeper market where there is…

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