How to Increase High Liquidity in your Crypto Exchange?
To develop a victorious white label bitcoin exchange platform, it is essential to launch your crypto exchange with the presence of liquidity feature. It is not in the matter for the liquidity enabled, but it has to be high liquidity for better trading experience. Before understanding how can you increase high liquidity for your crypto exchange, let us see what is liquidity and why you need to increase high liquidity for crypto exchange.
What is liquidity in crypto exchange?
Liquidity is the degree to which a particular asset can be quickly bought or sold without affecting the general stability of its price. In simplest terms, liquidity refers to the ability of an asset to be converted into cash easily.
The most liquid asset in existence in cash, since it is very stable and can be readily accessed and easily spent on buying, selling, paying debts or meeting immediate wants and needs. Therefore, cash is commonly used as the standard to gauge an asset’s liquidity.
Importance of liquidity:
In the context of cryptocurrencies, liquidity refers to the ability of a coin to be converted into cash or other coins easily. Liquidity is important for any tradeable assets including cryptocurrencies. A higher liquidity in the marketplace is preferred since it brings about the following advantages:
1. BETTER AND FAIR PRICES FOR EVERYONE
In a liquid market, prices are much fairer for crypto market users because of the large number of buyers and sellers. For instance, a robust marketplace with high trading activity ensures that sellers would sell at competitive prices (so as not to lose out) while buyers would bid at higher prices (according to their level of desperation), thereby creating an equilibrium market price that is equitable for all. A stable equilibrium price is a sign of market stability and ensures that market participants are not disadvantaged.
2. MARKET STABILITY
High liquidity ensures that prices are stable and will not be prone to large swings in the market due to large trades. For instance, it is very easy for “Whales” (term for individuals with huge amounts of money) to significantly influence prices – or worse, manipulate prices – in illiquid markets that have little market activity.
A single buy or sell order would create large swings in the cryptocurrency prices, which contributes to increased volatility and risks for the general market. In a liquid market, prices are stable enough to withstand large orders due to the presence of many market participants and their orders.
3. QUICKER TRANSACTION TIMES
It’s much more convenient and easy to buy or sell the cryptocurrency of your choice in a liquid market since your buy or sell orders would be filled much faster due to the greater amount of market participants. You can quickly enter or exit a trade instantaneously, which is sometimes critical in the fast-paced cryptocurrency markets.
4. INCREASED ACCURACY FOR TECHNICAL ANALYSIS
Technical analysis refers to the study of past prices and the use of technical indicators and charting patterns to predict cryptocurrency prices. Though many disagrees with the accuracy of technical analysis, it is still a widely-used methodology in understanding the general market and trading. Price and charting formation in a liquid market is more developed and precise, thereby enhancing its accuracy.
A market maker is a company or individual that regularly buys and sells financial assets at a publicly quoted price to provide liquidity to the markets. Their role is to satisfy market demand.
Crypto exchanges need market makers. If liquidity is low on a venue, exchanges usually try to attract market makers by the following methods:
- Decreasing maker trading fees
- Sharing profit from taker fees
- Paying market makers for their activity
Zero Commission Fees Will Increase Liquidity
According to Todd. the biggest winners from commission-free trading will be traders who use aggressive trading strategies with a single-tick profit target, like himself.
Although traders of all stripes will appreciate not having to hand over a slice of their profits to a centralized exchange.
“Speed is everything in futures trading,”the crypto trading interface is as advanced, easy to use, fast and robust as possible.”
It has a one-click ladder trading interface which will allow traders to trade in next to real-time, rather than going through several steps or multiple mouse clicks that could see their profits drop.
Automated Market Makers
Automated market makers is used to increase liquidity. These are basically trading bots with programmed algorithms designed to break even. 200 million tokens from the ICO were allocated to trading bots to deploy at their discretion, even during times of high volatility.
Final Words of Liquidity:
Liquidity Is Key
“Cryptocurrency Exchanges look to increase liquidity in a number of ways, often by offering a high selection of contract types, or an advanced user interface,”
Coinjoker- The pioneer in cryptocurrency exchange script development company offers liquidity solutions to increase high liquidity in your crypto exchange and enables your cryptocurrency exchange platform with less commission fees, adding a one-click trading feature and automated market makers are all innovative ways of providing a high level of liquidity for our customers and accountholder in your exchange platforms.”
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