Recent research has revealed that major cryptocurrency exchanges, such as FTX, have seen a high level of volatility and nearly 90% of cryptos have endured low trading volume. Only 2% of digital currencies are showing healthy liquidity.
As per a report from BitStacker, only 153 crypto-coins can be traded on multiple exchanges with high volume. In contrast, 5,886 cryptocurrencies have very low volumes and are exchanged on a limited number of platforms.
This shows that trading volume is not evenly distributed among the thousands of cryptos, and serves as a warning to those considering speculating on volatile digital currencies.
“The fact that so many cryptos suffer from low liquidity or trading volume is another reminder of how risky it can be to speculate in some of the smaller digital coins,” said Kris Lucas of BitStacker.com. “After all, there is nothing stopping an unregulated crypto exchange from creating statistics that overvalue a particular coin.”
The research tracked 6,656 cryptocurrencies, with only 2.30% being classified as having adequate liquidity. Such liquidity is usually referred to as “the market capitalization” and can be used to highlight cryptos with low daily trading or those with transactions limited to a few exchanges.
“Such an understanding of liquidity is useful because it can explain more than something like market capitalization,” the report noted. “In particular, it can help traders understand when it may be difficult to buy or sell substantial amounts of any cryptocurrency.”
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Disclaimer: Crypto Products and NFTs can be highly risky because they are not regulated. There may not be any regulatory recourse to recover losses from these transactions. Cryptocurrency is not legal tender. It is subject to market risk. Before investing, it is a good idea to consult an expert and read thoroughly the offering documents. Cryptocurrency Market predictions are speculative. Any investment made is at the reader’s own risk.
