According to the Coinmarketcap data, there are over 11,000 cryptocurrencies, and their number is rapidly growing. At the same time, newcomer traders and investors are struggling with choosing the most promising assets to invest in. The notion of liquidity is one of the most essential for new players. Further, we must look at the crypto liquidity from two angles: the cryptocurrency exchange software liquidity and the liquidity of a specific token. Let’s learn more about the distinctions between these categories.
What are the liquid crypto coins?
Digital currencies are designed to take the global economy to the next level. For example, Bitcoin (the most popular cryptocurrency) is meant to be an alternative legal tender. Tens of crypto coins aim to make this world better and more convenient for millions of people. Why? There are three key features of cryptocurrencies:
- All transactions are anonymous and secured;
- There are reduced fees on cryptocurrency exchange development services;
- No limits on payments.
Meanwhile, many business owners want to make money, creating assets without revolutionary goals and favors.
Kindly check security token platforms for the best crypto trading.
How to separate apples from oranges? Here is some advice: create a list of cryptocurrencies and spend some time to determine which assets are worth investing in.
To do this, use the following criteria:
1. Price of a specific digital currency;
2. Daily trading turnover.
On the one hand, trading volume is vital for newcomer traders and investors. Skilled Forex players understand that the coin’s price and trading volume are interrelated. For example. Bitcoin is a highly liquid asset on the crypto exchange White Label with a daily turnover of $26.1 billion. In terms of coins’ number, 444,899 BTC are traded every day. Meanwhile, the 2nd cryptocurrency Ethereum shows a trading turnover of 3,305,920 ETH tokens. Therefore, Ethereum is more liquid than Bitcoin.
When it comes to the most in-demand crypto coins, the vast majority of them have a high liquidity level. The specialists warn that investing in assets with a turnover of fewer than 10.000 coins per 24h is highly risky.
How to determine the liquidity of a cryptocurrency exchange?
The second feature of crypto liquidity is a connection with a White Label trading platform where users can exchange and hold their assets.
There are three factors to be reviewed on the crypto exchange:
- The number of listed assets;
- The number of supported markets;
- Daily trading turnover.
The higher the trading volume, the better an exchange is. At the same time, it’s quite a controversial statement. Let’s compare two cryptocurrency platforms:
- The first crypto exchange listed 240 tokens. Therefore, it provides traders with 525 pairs for exchange, while the daily turnover is $720 mln.
- The second platform offers to operate with 35 most popular coins on the 100 markets. The trading volume of the exchange is $520 mln.
As a result, the second venue is more liquid because it supports a vast number of markets where assets are traded.
Why do Forex prime brokers prefer to deal with a liquidity provider?
The notion of liquidity is crucial for traders and investors. The reason is simple: they expect to get their orders filled automatically. When it comes to Bitcoin, Ethereum, Ripple, and other top crypto assets, requests will be executed without hurdles. But what about fewer in-demand coins? In this case, your order book must be full of Bid/Ask orders for instant execution; otherwise, users may look for better platforms that accept cryptocurrency payments.
The high-end liquidity aggregators are responsible for a market depth on your exchange. Here are 4 essential criteria that will help to choose the best-matching company:
- The number of supported cryptocurrency pairs. First-class LPs provide access to dozens of markets listed on a dealing desk.
- Minimum spread. Contact the company that guarantees the minimum gap between Bid/Ask rates for a specific coin.
- Order execution time. A reliable crypto liquidity provider allows performing traders’ requests within milliseconds.
- Prompt and high-quality customer support. The multilingual team is ready to answer your question.
Create a list of potential liquidity providers and use this list of requirements to select the best option for your business.
