Balancing Bid and Ask Levels: Strategies for Stable Order Book Presence

Why Bid-Ask Balance Matters in Crypto Market Making

A healthy crypto market relies on the presence of both buy (bid) and sell (ask) limit orders at various price levels. This balance ensures that traders can transact efficiently, reduces slippage, and helps projects and exchanges maintain credible, accessible markets. For teams running automated market making bots, understanding how to distribute bids and asks is fundamental to supporting stable order book presence and avoiding the risks of one-sided liquidity.

This post explores key strategies for balancing bid and ask levels, practical configuration parameters, and how Atlas LP’s approach aligns with genuine market making principles.

---

The Fundamentals: What Is Bid-Ask Balance?

In every spot market, the order book is composed of two sides:

• Bids: Limit orders to buy at specified prices.
• Asks: Limit orders to sell at specified prices.

A balanced order book features comparable depth and distribution on both sides. Imbalances—such as a deep wall of bids but few asks—can lead to price instability, poor user experience, and increased risk for liquidity providers.

Why Imbalance Happens

Imbalances may arise due to:

• Sudden price moves or volatility
• One-sided trading activity
• Poorly configured market making bots
• Manual intervention or errors

Maintaining a steady, symmetric presence on both sides is essential for credible liquidity provision.

---

Strategies for Stable Bid-Ask Distribution

1. Define a Base Price and Spread Bands

A common starting point is to select a base price—often the current mid-price or a reference rate—and then define a spread band around it. This band determines the minimum and maximum distance (in basis points, or bps) from the base price where orders will be placed.

Example:

• Base price: $1.00
• Spread min: 40 bps (0.4%)
• Spread max: 100 bps (1%)

Orders are distributed symmetrically above (asks) and below (bids) the base price within this band.

2. Set the Number of Levels and Level Spacing

Decide how many bid and ask levels to maintain. More levels create deeper order books but may require more capital. Level spacing (in bps) determines how close each order is to the next.

Atlas LP allows configuration of these parameters, with validation to ensure minimum spread and exchange rules are met.

3. Randomize Order Sizes Within Constraints

To avoid predictable patterns and improve market quality, order sizes can be randomized between a minimum and maximum, while always meeting exchange minimum quantity and notional requirements. This randomness helps deter predatory trading and fosters a more natural order book.

4. Use Nested Bands for Dynamic Adaptation

Atlas LP supports day and hour bands nested within the main spread band, allowing for dynamic changes in spread width and order distribution based on time of day or trading session. This helps adjust liquidity in response to expected market activity, such as wider spreads during periods of high volatility or lower activity.

5. Monitor and Adjust in Real Time

Effective market making requires ongoing monitoring. Atlas LP’s bot reads the latest ticker and order book each tick (default every 3 seconds, configurable from 0.5 seconds), skipping updates if data is stale or the book is crossed. It then recalculates the desired bid and ask ladders, placing missing levels and cancelling only excess or mispriced orders.

If the order book is empty (no quotes), the bot seeds one buy and one sell order around the base price to restore market presence.

---

Practical Configuration with Atlas LP

Atlas LP’s Basic strategy is designed for stable, symmetric order book presence:

• Spread bands: Set in basis points, with a minimum width of 40 bps.
• Bid/ask levels: User-configurable, with validation against exchange rules.
• Level spacing: From as little as 0.1 bps.
• Order sizes: Randomized within user-defined min/max, always meeting exchange requirements.
• Tick interval: Default 3 seconds, adjustable from 0.5 seconds.
• API verification: Checks symbol rules, balances, open orders, and can optionally test with a harmless limit order.

All settings are validated before a bot can be started, reducing the risk of misconfiguration and one-sided books.

---

Risks of One-Sided Liquidity

Failing to maintain balance between bids and asks can result in:

• Price gaps: Large jumps in price if one side is thin or empty.
• Poor trader experience: Traders may face high slippage or be unable to transact at fair prices.
• Regulatory scrutiny: Imbalanced or manipulated books can attract unwanted attention.
• Increased risk for the market maker: Exposure to adverse price moves if inventory is not managed.

Genuine market making means providing resting limit orders on both sides, available for any participant to trade against. Wash trading, self-trading, or any form of volume manipulation is strictly prohibited.

---

Best Practices for Teams and Projects

• Regularly review bot settings to ensure both sides are covered and parameters reflect current market conditions.
• Monitor order book depth and spread to detect emerging imbalances early.
• Leverage alerts (such as Atlas LP’s Telegram notifications) to stay informed if fills stop occurring.
• Understand exchange symbol rules to avoid rejected orders due to minimum quantity or notional violations.

For more on order book dynamics and practical market making, see [/market-making].

---

Conclusion

Balancing bid and ask levels is a cornerstone of effective, genuine market making. By carefully configuring spread bands, level counts, order sizes, and monitoring in real time, projects and trading teams can support healthier, more resilient markets.

Atlas LP provides a robust framework for spot market making with validated settings, secure API handling, and real-time monitoring—helping teams maintain stable order book presence without promising or implying guaranteed profit or volume.

Atlas LP does not guarantee returns, prices, volume, or listings.