– Buyers and sellers in the order book how come their listing aren’t the same price as current market price?

Question

I’m new to crypto and trading and want to understand more of how things work behind the scenes. I have few questions to ask.

1) If Bitcoin current price is $27000 then why in the order book listing buyers and sellers are not buying and selling their Bitcoin at the exact current market price? Can they just list it whatever price they please like $35000?

2) Does the buy and sell listing in the order book have an affect on the current market price in any way? If so how and what happens?

In: 0

Answer 1

You can think of the order book as two lines of people, buyers and sellers. Both sides declare the price at which they are willing to buy or sell at. Then they line up such that the rightmost buyer is the one who quoted the highest price among buyers. They are facing the leftmost seller, who is the one who quoted the *lowest* price among sellers. If the price quoted by the buyer is at least as high as the price quoted by the seller, the parties at the fronts of their respective lines trade somewhere between those prices and get out of line.

The lines advance like this until you get to a leading buyer who has quoted a lower price than the leading seller. At that point, no more trades occur until new buyers/sellers enter the market or a buyer/seller in the market decides to quote a different price. Because the market price is typically the most recent price at which a transaction occurred, you should actually *expect* that the orders still sitting on the books will be different from those prices. If those parties had wanted to trade at the market price, they would have already done so and gotten out of line.

The important thing here is that the market price is just historical information about trades. There is no central authority that sets the market price, and no party in the market has an obligation to trade at the market price. If you are buying/selling an asset, you can probably expect to trade *near* the market price (especially if you’re a small player), but the exact price depends on finding a counterparty to the trade, and that itself could take time.