As major cryptocurrency exchanges such as FTX flounder amid high volatility, nearly 90 percent of cryptocurrencies have low trading volume, while 2 percent of crypto coins have healthy liquidity, a new study has found.
There are only 153 major crypto coins traded on multiple exchanges. In contrast, according to a report compiled by Bitstacker, there are 5,886 very low-volume cryptocurrencies that are traded on very small exchanges.
This reaffirms the uneven trading volume among thousands of cryptocurrencies and warns against speculating on crypto coins with low liquidity, the report said.
“The fact that many cryptocurrencies suffer from low liquidity or transaction volume is another reminder of how risky it is to speculate on some small crypto coins,” said Bitstacker.com analyst Chris Lucas.
“After all, there is nothing stopping an unregulated cryptocurrency exchange from creating statistics that increase the value of a coin,” he added.
The researchers tracked 6,656 crypto coins, and only 2.30 percent of them were classified as having good liquidity.
Liquidity is a term used to refer to the trading volume of an asset. The liquidity measure used in the study is to highlight those cryptocurrencies that have low daily trading volume or those cryptocurrencies where the trading is done with very limited transactions.
“Such an understanding of liquidity is important because it can explain more than things like market capitalization. It can especially help traders understand when it is difficult to buy or sell any amount of crypto coins,” the report said.
(This report was published as part of a self-generated Syndicate Wire feed. Apart from the subject, no editing was done by ABP Live Copy.)
Disclaimer: Crypto products and NFTs are unregulated and can be very risky. There may be no control over losses from such transactions. Cryptocurrency is not legal tender and is subject to market risks. Readers are advised to seek professional advice and carefully read the relevant documents and relevant literature on the subject before making any investment. Cryptocurrency market forecasts are speculative and any investment is made at the sole expense and risk of the readers.