Crypto glossary
Market depth
Market depth measures how much buy and sell volume rests in the order book near the current price, showing how large an order the market can absorb.
Depth is read from the order book. A deep market has large bids and asks stacked at prices close to the last trade, so a sizeable order moves the price only slightly. A shallow market has little resting volume, and even a modest order can push through several price levels. Depth charts plot this as two cumulative curves, bids on one side and asks on the other.
In crypto, analysts often quote 1% or 2% depth: the dollar value of orders within that distance of the mid price. Research firms and exchanges use it to compare venues, judge whether a newly listed token can be traded in size and spot liquidity drying up before volatile events. Depth is usually far thinner on small-cap tokens and outside the main trading hours of the US and Asia.
Displayed depth can mislead. Orders can be cancelled in milliseconds, some are placed only to create an impression, and part of the real liquidity sits hidden in iceberg orders, other exchanges or OTC desks.
Example
A token shows 400,000 dollars of bids within 2% of its price on its main exchange. A fund wanting to sell 2 million dollars knows a single market order would crash the price, so it splits the sale over several days.