How Liquid Are Litecoin, Chainlink And XRP? Traders Need To See This Report
07 April 2023 - 3:05PM
NEWSBTC
Operation Choke Point 2.0 has deprived the crypto industry in the
United States of crucial fiat payment channels. As NewsBTC
reported, the liquidity of the Bitcoin market is near historic
lows, but what about altcoins such as Litecoin (LTC), Chainlink
(LINK) and XRP? To that end, Kaiko, a digital asset data provider,
has released a new study. For traders, the research is a must-read
to assess how volatile each crypto asset is based on its liquidity.
And the study has a few surprises in store. Besides BTC, Which
Cryptocurrencies Are Most Liquid? At the beginning of the report,
Conor Ryder, research analyst at Kaiko, notes that market depth is
at a 10-month low because of OCP 2.0 and due to market makers
having to pull their orders from exchanges. “[S]o it is essential
investors can accurately evaluate the liquidity of each individual
asset to gain an understanding of how much short term volatility to
expect,” Ryder explains. Overall, Kaiko examined data on the 29
largest cryptocurrencies by market capitalization, excluding
stablecoins and wrapped tokens. To define a liquidity rank, three
criteria are used: volumes, market depth and spreads. For volume
and market depth, data from all active USD, BUSD, USDT and USDC
pairs on 11 of the most liquid centralized exchanges were combined.
For spreads, Kaiko uses only data from Binance, the most liquid
exchange with the widest range of markets. Related Reading: Bitcoin
Price Poised To Hit $50,000, This Crypto Expert Predicts In terms
of volumes, Dogecoin and Litecoin were the most conspicuous cryptos
in the first quarter of 2023. As the chart below shows, DOGE ranks
an impressive third behind BTC and ETH, ahead of several tokens
with larger market capitalizations. Litecoin ranks 4th, despite
having only the 11th largest market cap (excluding stablecoins).
“The cautionary note with LTC volumes is that earlier this year I
found some examples of LTC wash trading on Bitforex so the volume
figure alone is not enough to conclude that LTC is particularly
liquid,” the analyst states. Chainlink also outperforms its rank by
market capitalization and lands in 13th place by trading volume
after all. In terms of market depth, XRP and Solana stand out
positively in the subsequent places behind BTC and ETH. Litecoin is
again in a very good fifth place, while LINK ranks a respectable
12th. BNB, on the other hand, is a negative surprise. “BNB depth is
surprisingly low again, considering it is the native token of the
most liquid exchange, remaining in tenth despite being the third
largest non-stablecoin token,” notes Ryder, who also discusses that
the lower the market depth, the easier it is for larger market
orders to influence the price. Related Reading: Why Litecoin Could
Be Gearing Up For Its Greatest Rally Since 2017 In traditional
finance, spreads are the most commonly used indicator for assessing
the liquidity of a market. Generally, the smaller the spread, the
more liquid the market. In this category, Polygon (MATIC) and ATOM
impress, ranking ahead of Ethereum (ETH). Disappointing, on the
other hand, are once again BNB, which gets a 21st place in terms of
spreads on its own exchange, and Solana, which ranks 16th, despite
being the 8th largest non-stable token by market cap. How Do
Litecoin, LINK and XRP Fare Overall? There are definitely surprises
in the ranking of the overall liquidity, which results from the
three liquidity ratios mentioned above. In general, the rule is
that the smaller the amount of a metric to its score, the better
its liquidity. Behind Bitcoin and Ethereum, MATIC and Litecoin
occupy the best places and are thus less susceptible to the
influence of larger orders. XRP lands in 6th place, Chainlink in
8th, making them also generally prone to less volatility. Ryder
also highlights Aptos: APT liquidity far exceeded its market cap,
implying that it is one of the most liquid tokens relative to its
size and should benefit from less volatility as a result. LEO and
BNB, on the other hand, give Kaiko’s analyst cause for concern. The
market capitalization of the two exchange tokens is far excessive
in relation to their liquidity – ” a similar situation to FTT who’s
illiquidity played a role in the collapse of FTX.” At press time,
the Litecoin price stood at $90.30. Thus, LTC is still writing
higher lows in the 4-hour chart, maintaining its upward trend.
Featured image from Traxer / Unsplash, chart from TradingView.com
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