Price discovery
How does trading work out a price that buyers and sellers will both accept?
In plain words
Price discovery is the process by which buyers and sellers, through repeated trades, settle on a price both will accept. The agreed price is the last one at which a buyer and a seller actually met; it changes whenever new orders or information shift the balance between them.
Why it matters
A wide range on heavy volume signals that participants disagreed sharply about value, and prices agreed one week may be reopened the next. For anyone taking risk, the discovery process is what makes positions move: the accepted price is provisional, not settled.
In a real week: ETH, week of 24 February 2025
In the week of 24 February 2025, ETH opened at 2819.7 and closed at 2518.11, a fall of 10.7%. Buyers and sellers tested a high of 2839.95 on Monday 24 February at 00:00 UTC and a low of 2076.26 on Friday 28 February at 06:00 UTC, a range of 36.78%, on dollar volume of 15.88bn, 1.28 times its prior 12-week average. Sunday 2 March was the best day at 13.56%, including a 9.56% move in one hour at 16:00 UTC, and the week closed at 57.9% of its range, in the middle third.
A common mistake
Treating the last traded price as a final verdict. Discovery can resume as soon as new information or orders arrive, so the closing price is only the most recent agreed point, not a lasting consensus.