How are crypto asset prices formed?
The price of the crypto assets traded on Paribu is formed by the matching of the buy and sell orders placed by users. In this article you can find how the price is determined and why you may see a difference between platforms.
How does Paribu determine prices?
Paribu does not determine prices unilaterally. The price of an asset is formed by the matching in the order book of the buy orders placed by users who want to buy that asset and the sell orders placed by users who want to sell it. Paribu operates the platform on which this matching takes place; it does not set the price agreement between buyer and seller itself.
Every pair (for example BTC-TRY or ETH-USDT) has its own order book and therefore its own price. The prices you see in the TRY and USDT pairs of the same asset are formed independently of each other according to the balance of supply and demand in that pair.
How do supply and demand move the price?
The price moves up or down according to the level at which buyers and sellers reach agreement.
- Rising demand: When the number and order size of those who want to buy an asset increase, the existing sell orders are filled quickly. When buyers start taking the next, higher priced sell orders, the price rises.
- Rising supply: When the number and order size of those who want to sell increase, the existing buy orders are filled. When sellers move to the next, lower priced buy orders, the price falls.
The order density at a price level (depth) determines how easily the price will move. In a pair where depth is high, a large order affects the price only to a limited extent; in a pair where depth is low, an order of the same size can create a noticeable move in the price.
You can find how the order book is read and what the depth indicator tells you in What is the order book and how do you read it?.
What does the price on my screen show?
The price you see in the Markets list and on the market detail screen of an asset is the price of the most recent trade executed in that pair. This value is updated instantly when a new match occurs.
This price does not mean that your order will certainly be filled at the same price. When you place a market order, your trade is matched with the most suitable counter orders available in the order book at that moment; because of the difference between the highest buy and the lowest sell price (the spread), your execution price may differ from the last trade price. If you want to trade at a specific price, you can use a limit order.
Why do I see a different price on other platforms?
The order book, user base and liquidity of every platform are independent of each other. Because a separate balance of supply and demand is formed for the same crypto asset on every platform, prices may differ from platform to platform. This is a normal situation worldwide.
The size of the price difference is usually related to liquidity: in assets with high trading volume the difference between platforms stays small, while in assets with low trading volume it can be more noticeable.
Note: Seeing different prices on different platforms at the same time is not a sign of an error or a delay; every platform shows the last trade price in its own order book.
Factors that affect price formation
The price is formed directly by the orders of buyers and sellers; the main factors that shape these orders are as follows:
- Trading volume: The total amount that changes hands over a certain period. High volume helps the price form more steadily.
- Liquidity and depth: The density of the orders waiting in the order book. As depth increases, the effect of large orders on the price decreases.
- Pair selection: Because TRY and USDT pairs trade in separate order books, their prices are formed independently of each other.
- Market conditions: The general tendency in the global market is reflected in the trading behavior of users and affects the order book.
Warning: Paribu does not offer price forecasts or investment advice. No forecast is shared about how the price of a particular asset will move; your investment decisions depend on your own assessment.
Frequently asked questions
Does Paribu determine prices itself?
No. The price is formed by the matching in the order book of the buy and sell orders placed by users. Paribu operates the platform that brings buyer and seller together; it does not determine or change the price of an asset unilaterally.
Why do the TRY and USDT prices of the same asset not match exactly?
TRY and USDT pairs trade in separate order books. Because a separate balance of supply and demand is formed in each pair, the prices of the two pairs may not match exactly at the current exchange rate.
Why was my trade executed at a price different from the one I saw on the screen?
The price on the screen is the price of the most recent trade executed. When you place a market order, your trade is matched with the most suitable counter orders in the order book at that moment; because of the spread and the order depth, the execution price may differ. If you want to set the price yourself, you can use a limit order.
How often are prices updated?
Prices are updated in real time. When a new match takes place in a pair, the last trade price is refreshed instantly; the order book also continues to be updated live.
What should I do if the price of an asset changed very quickly?
Price movements are the natural result of the balance of supply and demand. If you want to keep your execution price under control while trading, you can use a limit order instead of a market order and set your order amount according to the depth you see in the order book.
Related articles
- What is the order book and how do you read it? — Buy and sell orders, spread and depth
- How to place a market order? — Placing an order at the market price
- How to place a limit order? — Placing an order by setting your own price
- What is trading volume (VOL)? — Reading and interpreting trading volume
- How to buy and sell crypto assets? — Trading steps and views
Author:
Paribu