Blog

An evaluation by blockchain analytics platform Kaiko revealed that XRP and Dogecoin (DOGE) are among the many prime 4 most liquid cryptocurrencies, solely trailing Bitcoin (BTC) and Ethereum (ETH).

This discovering challenges the standard knowledge that market capitalization is a healthful metric for evaluating a cryptocurrency’s value, and thus, liquidity.

Assessing Crypto Liquidity: What Factors Were Considered?

In their report, Kaiko argues that liquidity, which measures how simply an asset could be traded, is a extra correct illustration of a cryptocurrency’s true price. Market capitalization and totally diluted worth, based on Kaiko, present an incomplete image of a cryptocurrency’s worth proposition. 

To measure market capitalization, the asset’s value and tokens in circulation play a essential position. Meanwhile, liquidity considers a number of elements usually past costs, together with supporting exchanges and the price of buying and selling the identical asset, quantified via spreads.

Gauging asset liquidity, Kaiko’s evaluation took under consideration two market depth ranges: 0.1% and 1%. To correctly assess the extent of liquidity for merchants, market depth at 0.1% was used as a metric. Meanwhile, the 1% market depth studying was used to trace the liquidity of long-term holders.

Herein, Kaiko stated liquidity throughout each classes fell throughout the board in Q3 2023.

XRP, DOGE, And LTC Shining, AVAX Drops

Kaiko notes that XRP, DOGE, Cardano (ADA), and Solana (SOL) all carried out in step with their market capitalization rankings relating to liquidity. XRP and DOGE emerged among the many prime 4, although they often remained among the most liquid, utilizing market capitalization as lead. 

Even so, Litecoin (LTC) outperformed its market cap ranking to put fifth among the many most liquid cryptocurrencies. According to CoinMarketCap, LTC is ranked seventeenth with a market cap of over $5.6 billion.

While LTC outperformed, others, together with Uniswap (UNI), Avalanche (AVAX), Shiba Inu (SHIB), and Cosmos (ATOM), dropped within the liquidity rankings. AVAX posted sharp liquidity losses, dropping 11 spots. This is regardless of the coin’s stellar efficiency previously few buying and selling months.

To quantify, AVAX has outshone Bitcoin (BTC), rallying by over 400% within the final two months alone.

Meanwhile, due to how effectively Bitcoin Cash (BCH) costs carried out within the final quarter, it is without doubt one of the largest liquidity gainers. Rising costs additionally drove buying and selling volumes to new ranges, subsequently boosting liquidity.

At the identical time, Kaiko famous that Ethereum Classic (ETC), Tron (TRX), and Stellar (XLM) rose increased within the rankings.

Feature picture from Canva, chart from TradingView