XRP and Dogecoin Among Most Liquid Cryptocurrencies, According to Kaiko Analysis
An analysis conducted by blockchain analytics platform Kaiko revealed that XRP and Dogecoin (DOGE) are among the top four most liquid cryptocurrencies, trailing only Bitcoin (BTC) and Ethereum (ETH). This finding challenges the belief that market capitalization is the sole metric for evaluating a cryptocurrency’s price and liquidity.
Assessing Crypto Liquidity: What Factors Were Considered?
Kaiko argues that liquidity, which measures how easily an asset can be traded, provides a more accurate representation of a cryptocurrency’s true value compared to market capitalization and fully diluted value. While market capitalization relies on price and tokens in circulation, liquidity takes into account factors such as supporting exchanges and trading costs.
Kaiko’s analysis considered two market depth levels, 0.1% and 1%, to gauge asset liquidity. The 0.1% market depth metric was used to assess liquidity for traders, while the 1% market depth reading tracked the liquidity of long-term holders. The analysis revealed a decline in liquidity across both categories in Q3 2023.
XRP, DOGE, And LTC Show Liquidity Strengths, AVAX Drops
XRP, DOGE, Cardano (ADA), and Solana (SOL) demonstrated liquidity consistent with their market capitalization rankings. XRP and DOGE emerged among the top four most liquid cryptocurrencies. Litecoin (LTC) also outperformed its market cap rating to secure the fifth spot in terms of liquidity.
On the other hand, Uniswap (UNI), Avalanche (AVAX), Shiba Inu (SHIB), and Cosmos (ATOM) experienced drops in their liquidity rankings. AVAX, despite its impressive performance in recent months, suffered significant liquidity losses, falling 11 spots. Bitcoin Cash (BCH) saw gains in liquidity due to its strong price performance and increased trading volumes.
Ethereum Classic (ETC), Tron (TRX), and Stellar (XLM) also rose higher in the liquidity rankings.
Hot Take: Liquidity as a More Comprehensive Metric for Evaluating Cryptocurrencies
The analysis by Kaiko highlights the importance of considering liquidity as a crucial metric when evaluating cryptocurrencies. While market capitalization provides an incomplete picture of a cryptocurrency’s value proposition, liquidity takes into account various factors that impact an asset’s tradability. By assessing liquidity through market depth levels, it becomes clearer which cryptocurrencies offer higher liquidity for both traders and long-term holders.
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