Operation Choke Point 2.0 Impact on Cryptocurrency Liquidity
Operation Choke Point 2.0 has had a significant impact on the cryptocurrency industry in the United States, particularly in terms of fiat payment channels. As reported by NewsBTC, the liquidity of the Bitcoin market has reached historic lows. However, it’s not just Bitcoin that has been affected. Altcoins such as Litecoin (LTC), Chainlink (LINK), and XRP have also experienced changes in liquidity due to Operation Choke Point 2.0.
Kaiko Study on Cryptocurrency Liquidity
Kaiko, a digital asset data provider, has conducted a study to assess the liquidity of various cryptocurrencies for traders. The study takes into account three criteria: volumes, market depth, and spreads. The findings of the study provide insights into the volatility of each cryptocurrency based on its liquidity.
Examination of 29 Largest Cryptocurrencies
Kaiko examined data on the 29 largest cryptocurrencies by market capitalization, excluding stablecoins and wrapped tokens. The study combined data from all active USD, BUSD, USDT, and USDC pairs on 11 of the most liquid centralized exchanges to assess volumes and market depth. Spreads were analyzed using data only from Binance, which is considered the most liquid exchange with the widest range of markets.
Cryptocurrencies with High Volumes
In terms of volumes, Dogecoin and Litecoin were the most prominent cryptocurrencies in the first quarter of 2023. DOGE ranked third, following BTC and ETH, and ahead of several tokens with larger market capitalizations. Litecoin ranked fourth, despite having only the 11th largest market cap (excluding stablecoins). However, the analyst notes that caution should be exercised with LTC volumes due to the possibility of wash trading on Bitforex, indicating that volume figures alone may not accurately reflect its liquidity.
Cryptocurrencies with High Market Depth
In terms of market depth, XRP and Solana stood out positively, ranking behind BTC and ETH. Litecoin also ranked fifth in terms of market depth, while Chainlink ranked twelfth. However, BNB was a negative surprise, with surprisingly low market depth considering it is the native token of the most liquid exchange. Ryder notes that lower market depth makes it easier for larger market orders to influence the price.
Spreads as an Indicator of Liquidity
Spreads are a commonly used indicator for assessing the liquidity of a market in traditional finance. Generally, smaller spreads indicate higher liquidity. In this category, Polygon (MATIC) and ATOM ranked higher than Ethereum (ETH) in terms of spreads. However, BNB ranked 21st in terms of spreads on its own exchange, and Solana ranked 16th, despite being the 8th largest non-stablecoin token by market cap, which were disappointing findings.
Overall Liquidity Ranking of Litecoin, Chainlink, and XRP
The overall liquidity ranking, which takes into account the three liquidity ratios mentioned above, revealed some surprises. Bitcoin and Ethereum were the top two cryptocurrencies in terms of liquidity. MATIC and Litecoin occupied the next best positions, indicating lower susceptibility to the influence of larger orders. XRP ranked 6th and Chainlink ranked 8th, indicating relatively lower volatility. The analyst also highlighted Aptos, whose liquidity exceeded its market cap, suggesting it is one of the most liquid tokens relative to its size and may experience less volatility as a result. On the other hand, LEO and BNB
Ecosystem
Research
News Network
About