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What are the Most Liquid Cryptocurrencies?

What are the Most Liquid Cryptocurrencies?

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It is increasingly challenging to meet someone who has never heard of Bitcoin. This virtual payment method is constantly growing in popularity – and growing faster than other virtual assets. At the end of the day, it’s important to remember that Bitcoin is just one of the cryptocurrencies available on the market. What other examples of crypto are there? Which cryptocurrencies are the most liquid? And what is crypto liquidity? We’ll give you a hint!

Table of contents

Bitcoin and altcoins – the main types of cryptocurrencies

The first decentralized payment projects emerged in the 1990s, but it is widely accepted that Bitcoin was created in 2009 and led to cryptocurrencies and blockchain technology. To this day, it remains the most popular and essential digital currency. However, it is also true that the creation of Bitcoin and the publication of its source code paved the way for the development of other cryptocurrencies. Because they were an alternative to Bitcoin, they came to be called alternative cryptocurrencies or altcoins. Their examples include Ethereum (ETH), Ripple (XRP), Cardano (ADA), Litecoin (LTC), and Stellar (XLM).

What is liquidity in cryptocurrencies?

The concept of liquidity can be defined as the ability to buy or sell market assets without a significant price change. Cryptocurrency liquidity understood in this way can apply to both the market and said assets.

Achieving liquidity in the market means that there are always people willing to trade. The liquidity of own assets, on the other hand, means that their owner has no difficulty in liquidating them, i.e. selling them or exchanging them for other purchases.

So how should the concept of liquidity be defined in the cryptocurrency market? As with any other form of investment, investors in the crypto market also hope to make a profit. For this to happen, it is necessary to be able to buy and sell crypto products quickly. For this, you need the market you are trading in to be liquid. This means that there must be a lot of trading in the market and the buying and selling prices of cryptocurrencies must attract investors.

How to check liquidity in cryptocurrency market?

It is worth looking at three key indicators to check if the crypto market is liquid. These are the 24-hour trading volume, the depth of the order book, and the value at which the sell price exceeds the crypto buy price or not.

However, it is important to know that the order book is not always an accurate indicator of the liquidity of the cryptocurrency market. This is because there can be automated stop-limit orders and icebergs in the market. Their presence in the order book is revealed only when certain conditions are met.

Liquidity is an important factor to pay attention to when placing orders. In addition, it is a critical indicator that facilitates entry or exit from the crypto market.

Bitcoin, Ethereum and other cryptos – are they the most liquid cryptocurrencies?

Analyzing the cryptocurrency market until recently, it can be said that there are no more liquid assets than Bitcoin. Due to its independence from the banking system and limited supply, Bitcoin, which many call “digital gold”, had to be protected from inflation just like physical gold. Ethereum, the second most capitalized cryptocurrency in the world, was supposed to be even better in this regard thanks to its technology. However, over the past 12 months, Bitcoin has lost 35 percent of its value and Ethereum has dropped more than 40 percent.

Takeaway

Will this trend continue? Unfortunately, there is no clear answer to this question. The cryptocurrency world is very diverse. Currently, more than 1,600 cryptocurrencies are listed on large, mid-level and specialized exchanges. However, the number of significant ones does not exceed two digits. For this reason, we can still count this smaller group of cryptocurrencies that are traded for enough real liquidity. We can probably list about 20-30 digital currencies in this category, with the two most popular cryptocurrencies, Bitcoin and Ethereum, leading the way. In addition, the list of the most popular and liquid cryptocurrencies includes Tether, US Dollar Coin, Binance Coin, Ripple XRP, Binance USD, Cardano, Solana (SOL) or Dogecoin (DOGE).

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