The Marsbase team carried out research on the liquidity of cryptocurrencies on exchanges. The hypothesis was that if enough orders of a certain amount are placed then the market price of cryptocurrencies can be affected significantly depending on the density of the order books. A total of 162 coins were studied to find out the effects and span of this potential issue.
The research was carried out by handpicking relevant cryptocurrencies from the top 300 pair list found on CoinMarketcap and selecting relevant exchange/s to extract liquidity data snapshots from. The snapshots were taken from Binance and/or Okex each day from December 15, 2020, up until February 1, 2021. Indicators such as the order price of the asset and order size were used to form the basis of the calculation.
The percentage of the crypto assets price to change was calculated according to order interval sizes (in $) which are defined in the table provided in the data section below. An average of the percentage was taken between Binance and Okex if the BTC and USDT pairs of the assets were found on both exchanges. Some crypto assets did not have large enough order books to calculate an accurate percentage for price change and therefore an extrapolation was performed on the data that was available.
The data gathered has varying results as was expected due to order book sizes of each asset being different according to the demand. For assets with low-density order books the price changed by a factor of ~99%, which is not possible but shows us that the liquidity crisis does exist on a large scale. Out of the 162 crypto assets, 103 assets price changed by ~99% if an order size accumulating $1,000,000 was performed. Some of these assets from the 103 had the biggest liquidity crisis, causing their prices to change ~99% with an order accumulation of <$200,000.
The table below shows 20 assets with the least liquidity crisis out of the total 162 coins studied.
The table below shows 20 assets with the biggest liquidity crisis out of the total 162 coins studied. These assets experienced higher price changes due to the nature of the orderbook density being low. The marketcap data shown in the table below was taken on March 9, 2021. (MM stands for million and BIL stands for billion)
The data clearly shows that even for trades amounting to ~$10,000, the price of some crypto assets can be impacted drastically. Due to this, problems with trades of such positions may arise in the future.
The hypothesis has therefore been proven correct as if enough orders of a certain amount are placed then the market price of cryptocurrencies can be affected significantly depending on the density of the order books.
There is major potential in focusing on liquidity for large crypto holders (whales) in the crypto market. These traders can move markets on their own accord which possess a serious risk on illiquid markets. Our mission will be to aggregate large crypto asset holders and provide them with beneficial services that align the interests of both them and the crypto market as a whole.
The Marsbase platform will allow these “whales” to thrive outside of traditional crypto exchanges by acquiring large positions in cryptocurrencies by simply submitting offers to buy/sell a large amount of a certain asset with a discount to the market price. This discount model will provide an incentive for both the buyers and sellers who choose to use the platform.