In crypto trading, a bid price indicates the highest price a buyer is willing to pay for a specific digital asset or cryptocurrency. Traders or investors who wish to sell their assets quote an ask price and accept bid prices from other traders or investors interested in buying their assets.
The ask price and bid price are recorded in the order book, and the highest bid price quoted by a buyer is always lower than the lowest ask price mentioned by the seller. Based on the bid prices received, a seller can pick the buyer they wish to sell their asset and fulfill the trade order in the market.
A bid price that is too far below the ask price could potentially result in an unfulfilled trade order in the crypto market. This usually happens when there is a significant price spread between a seller's quoted ask price and the bid prices they receive from buyers for the asset.
Market makers play a crucial role in determining the bid price as they quote the prices at which they are willing to buy (bid) and sell (ask), thus providing liquidity to the market and helping to narrow the spread between the bid and ask prices.
In a bidding war, however, multiple buyers will outdo each other in quoting higher bid prices. This occurs when there is high market demand for the asset sold.