Say there is an exchange with open buy and sell orders, why are there so many orders placed. So far away from the mid price. So for example is lowest sell order is say 1.01 and highest buy order is 1.00. It seems there is a trend that most of the open orders will reside away from the mid price. That is the total amount of orders at a given price is proportional to the distance from the mid price.
Spoofing: some people place buy and sell orders that they do not want executed (so away from the mid-price) to create a false impression of demand or supply , so that the market moves in their desired direction
Catching the flashcrash: occasionally the market has a blip with a temporary gross excess of supply or demand causing a volatile price shift which then returns to close to the original price when other players outside the market notice the unjustified price swing; leaving a bid some way away from the midprice can profit from such events providing that the price returns
Volatility survival: rather like opposing WWI trenches which got further apart over time as proximity became unsurvivable, short-term small-scale volatility will tend to pick off many of the bids close to the midprice, while leaving those further away untouched for longer periods of time
Market regulators tend to regard the first of these as bad (illegal in the US), the second as good, and the third as a natural though undesirable indicator of lack of liquidity