What Does TWAP Mean in Crypto?

By Julia Cook
Published Nov 29, 2022 and updated Dec 15th, 2022

An asset’s time-weighted average price (TWAP) is a measure of the price of a cryptocurrency over a specific period of time.

‘Asset’s time-weighted average price (TWAP)’ is a term borrowed from traditional financial that refers to the average price of a security over a certain timeframe. It has been applied to measure the value of cryptocurrencies and altcoins since the United States’ Securities and Exchange Commission (SEC) and other international financial governing bodies have chosen to recognize and regulate many tokens as securities.

The purpose of this calculation is for trading purposes. The trader or investment adviser will apply TWAP trading algorithms to the cryptocurrency market or to specific cryptocurrencies in an attempt to determine the optimal time to either buy or sell a specific cryptocurrency for the highest profit. Since it can be made over any period of time, it can be applied on an hourly, daily, monthly or annual basis to try and pinpoint trends. For instance, whether there is usually a specific time of day or time of year when the price/demand of the cryptocurrency is higher or lower, this might serve as an indicator for when trades should be conducted in the future. Many cryptocurrency exchange platforms offer this service for free, in the form of adjustable graphs, such as the one below that was taken from CoinMarketCap:

A graphic showing an example of TWAP

TWAP Orders

Some cryptocurrency exchange platforms such as Binance offer the option to set a TWAP order on their trading app. This allows the user to set up a bot to automatically conduct trades of certain cryptocurrencies on the user’s behalf according to a TWAP algorithmic strategy, within a timeframe set by the user.