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Understanding Liquidity and its Importance

Liquidity is a crucial factor which affects the tendency of an asset to be sold and liquidated. Every bond, stock and digital currency needs to have a market for immediate settlement or to channelize the buy and sell mechanism. As the number of cryptocurrencies is growing, so is the crypto market. But not all cryptocurrency exchanges can capture a large customer base.

There is a need to acknowledge the importance of liquidity for crypto exchanges and traders. As more liquid the exchange would be, more customers would be attracted to it.

Importance of liquidity in Crypto Exchange

The importance of liquidity — while indulging in white label crypto-exchange software development or building a new crypto exchange from scratch — can be highlighted under two main divisions:

  • Fairtrade prices- When an adequate number of crypto investors or traders are present in the crypto exchange, then there are increased chances that fair prices would be maintained in the system. This is due to the factor that for every asking price there would be a bid price and vice-a-versa. Thus, liquidity would be efficiently maintained and pricing would also remain at standardized rates.

Despite knowing the benefits of liquidity, many businesses overlook the need to implement high-liquidity options during white label crypto exchange development or building a custom exchange from ground zero. Let us explore what could be the possible reasons for illiquidity in the market.

Issues pertaining to lower liquidity

The increasing number of cryptocurrency exchange platforms is one of the reasons for low liquidity on exchange platforms. This situation does not allow participants to exit the market at the right time. Let us understand some more factors that describe the problem of liquidity.

  • Long term investment: The market of crypto assets is still at a small-scale. Traders or investors come with a motive to invest for a longer time as they do not have enough options to trade regularly in crypto assets. But in today’s time, the trend is changing and newer white label crypto exchange development is bringing more and more options of trading and investing.

Ways to solve the liquidity problem

Many avenues of active trading and investing have been opened up to invite more enhanced characters of trading. Other means to resolve the problem of liquidity include:

  • Listing of cryptocurrencies: A crypto exchange needs to decide upon the number of crypto assets to be listed in the exchange software. While choosing the cryptocurrencies, it is beneficial to consider trading trends and future predictions of currencies. With an enhanced portfolio of listed cryptocurrencies, your exchange is more likely to acquire more users.

End Notes

The liquidity of a crypto exchange can be definitely enhanced with the implementation of more trading features. A feature-rich cryptocurrency exchange reinforced with full security and modern UI enables the crypto investors to trade frequently. The ease of crypto trading will encourage more circulation of cryptocurrencies and thus maintaining a stable and liquid environment.

If you are planning to build your crypto exchange, Antier can help. Whether it is white label crypto exchange development or you want to build a custom exchange from ground zero, we fortify your exchange with high-liquidity options and industry-leading features to achieve world-class security and performance.

View a free demo of our white label exchange underpinned by advanced features, or connect with our subject matter experts to discuss your need for a custom crypto exchange.

Written by

White label cryptocurrency exchange development, P2P exchange development, STO development & marketing, coin development, biometric wallet development

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