Types of Crypto liquidity

The scale of the cryptocurrency industry requires categorizing. While providing liquidity, it’s essential to consider exchange requirements and needs. All crypto requires unique liquidity depending on its volume. There are five different types of crypto liquidity.

Exchange 

Exchange liquidity is essential in the cryptocurrency space, enabling traders to easily purchase or sell popular assets on exchanges. High levels of exchange liquidity promote active trading and market stability.

Over-the-Counter 

OTC liquidity allows institutions and investors to buy or sell large amounts of crypto without affecting market prices. These transactions are facilitated by brokers who negotiate deals directly between users, bypassing an exchange.

Wallet 

Wallet liquidity providers evaluates how conveniently an asset can be acquired or sold from wallets that support it. Factors influencing wallet liquidity include the number of wallets backing a given asset, convertibility into other currencies, and movement restrictions on transferring said assets.

Derivatives 

Derivatives are powerful financial tools that influence spot markets by allowing traders to speculate on the future price of an asset. Providing liquidity market size can have profound implications for underlying assets.

Network 

Network liquidity is a fundamental determinant of the success and usability of blockchain networks. It measures how active users are, the number of transactions they process, and network speed to indicate asset exchangeability between participants.