Exchanges & market microstructure

The deep difference is custody. On a CEX you trade IOUs inside their database and trust them to honor withdrawals — FTX proved what that trust is worth when it breaks. On a DEX your assets never leave your wallet, but you inherit smart-contract and self-custody risk instead.

Serious traders use both: CEX books for size and derivatives, DEXes for long-tail assets and self-custodied capital. The Spot & On-Chain course covers the DEX/AMM machinery in depth; here you need the trade-offs.

The order book is the market's true state: every resting bid and ask, stacked by price. The chart is history; the book is now. Three readings matter most.

Spread — the gap between best bid and best ask. Tight spread = healthy, competitive market. Depth — how much size rests near the top of the book; it determines what your order will cost to fill. Imbalance — a wall of bids under price with thin asks above suggests short-term upward pressure (and vice versa), though walls can be spoofed and pulled.

A market order fills against the book level by level: the first chunk at the best ask, the next chunk higher, and so on. Your average fill price is therefore always worse than the quote you saw — that difference is slippage.

The painful property: impact grows roughly with the square root of order size in liquid markets, and much faster in thin ones. Doubling your size more than doubles nothing — but 10×-ing your size in a thin altcoin book can eat several percent instantly.