Kaiko Analysis Reveals Liquidity Rankings for Crypto Assets
Kaiko, a blockchain analytics platform, conducted an investigation into the liquidity of various crypto assets and found that some lower market cap assets outperformed higher ones. According to Kaiko’s Q3 liquidity rankings, XRP and Dogecoin (DOGE) ranked higher in liquidity than Solana and Cardano, coming in behind only Bitcoin and Ethereum. Surprisingly, BNB ranked 8th in terms of liquidity, and Litecoin also performed well.
Importance of Liquidity in Evaluating Crypto Assets
While market cap has traditionally been used to evaluate crypto assets, Kaiko argues that liquidity, along with other metrics like volume and market depth, is a better indicator of a token’s real value. For example, FTX’s token FTT had a high market cap but lacked sufficient liquidity on exchanges. Bitcoin and Ethereum ranked first and second in liquidity respectively. However, BNB underperformed and XRP surpassed Solana and Cardano in terms of liquidity.
Implications for Dogecoin and Crypto Assets
XRP’s boost in liquidity during the quarter can be attributed to regulatory clarity in the US. Despite ranking 10th in market cap, Dogecoin solidified its position as a leader among meme coins by ranking 5th in liquidity. Similarly, Litecoin ranked higher in liquidity compared to its market cap ranking. On the other hand, AVAX and TON saw their liquidity rankings drop significantly compared to their market cap rankings.
Factors Considered in Measuring Liquidity
Kaiko measured liquidity based on factors such as spread, average daily trading volume on different exchanges, and two different market depth levels for different types of traders. BTC had the highest trading volume, followed by ETH and XRP. However, SOL outperformed DOGE in terms of trading volume.
Hot Take: The Significance of Liquidity for Cryptocurrencies
Liquidity plays a crucial role in the success of cryptocurrencies over the long term. The Q4 2023 results are expected to provide further insights into crypto liquidity, as many cryptocurrencies have reached new yearly highs in terms of market cap. Ensuring sufficient liquidity is essential for attracting investors and maintaining stability in the crypto market.
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