As cryptocurrency prices continue their downward spiral, a more alarming trend is emerging in the shadows: a severe token liquidity crisis. Despite the allure of bargain prices, trading volumes have nosedived across major exchanges, leaving many tokens gasping for liquidity.
This unexpected development is reshaping the cryptocurrency landscape, challenging both veteran and novice traders alike. Our in-depth analysis reveals the extent of this liquidity crunch and its far-reaching implications for the future of digital asset trading.
Volumes plummet despite price drops
Cryptocurrency prices have plunged 80-95% since the start of the year. Yet, traders aren’t rushing to buy at these lower prices. Token liquidity has significantly decreased across major exchanges. 60% of listed cryptocurrencies are trading below January levels. Order books are now heavily skewed towards the sell side. November has seen an acceleration in declining volumes.
Token Liquidity Squeeze: Over 20% of Cryptocurrencies Face Critical Volume Loss
Over 20% of cryptocurrencies that remain listed on major exchanges (see note on examined exchanges) now have less than 90% of the trading volumes they witnessed at peak hype in January. More than half of those are effectively dead in the water with no traders looking to buy.
A Handful of Outliers
On the other end of the spectrum, 102 of 410 tokens saw volumes increase by more than 100% in January compared to October. November, however, shows that this number has dropped to 91 within less than a month. Only a handful of tokens have found some increase in volume.
Token Liquidity Variations Across Exchanges
Liquidity from one exchange to the other differs, however – quite dramatically in some cases. For Poloniex, quite literally all listed tokens have less trading volume than at the start of the year. In the case of Bittrex – three tokens (see interactive chart below). The outliers, by reported volume at least, are OKEx and Huobi, with Binance having a fairly equal share of trading volumes across the percentage bands. Just under half of Binance’s listings have decreased volumes compared to the start of the year.
New Token Liquidity Challenges: Fresh Listings Struggle
Over 75% of the tokens that have been added to exchange this year have seen their volumes in complete decline in October versus November (see chart).
The article was provided by our partner Diar.
