Liquidity is a key quality for any good crypto-exchange. It is especially significant during bull and bear runs, when thousands of traders and investors seek to either profit from the bull wave, or cut their losses during a bear run. New research by the Singapore-based SophonEX sheds light on the performance of crypto-exchanges during the bull run last week.
SophonEX used a variety of indicators and factors such as price impact, hourly trading volumes, and order books to identify which crypto exchange provide its traders and investors with more liquidity and are more robust during a busy time such as a bull run. According to SophonEX, the analysis also helps identify “which exchanges are only good in “normal” periods, with any crisis debunking their flashy appearance”.
According to the research firm, Changpeng Zhao’s Binance is a perfect example of a robust cryptocurrency exchange. The firm based this conclusion on the fact that Binance had a low 24h-median-price-impact, which rose only insignificantly, during the bull run. This is an indication of robustness and liquidity, the firm stated.
Other exchanges such as Gdax (Coinbase Pro) and Huobi had low price impacts as well. However, these rose significantly when the bull run began. Here, the order book thinned out quickly and “it was likely many market makers temporarily left the exchange without hesitation”.
SophonEX also measured the ratio of fake trading volumes in each crypto exchange, by comparing the peak trading volume against the 24-hour median volume ratio. The firm’s analysis in this respect was prejudiced on the fact that whenever there was a bull run or a “crisis,” real trade volumes rose, while fake trading volumes didn’t. The research found that over half of Huobi, Hitbtc, and Okex’s trade volumes were fake.
The aforementioned research is good news for noted crypto exchanges, Binance and Gdax (Coinbase Pro), both of whom have been deemed to be sufficiently robust and liquid in times of crisis. On the other hand, it also points a finger at exchanges like Huobi and Okex at a time when cryptos’ fake trading volumes are still making the news. Finally, the report concluded by stating that the “BTC price surge incidence has long-lasting repercussions towards market makers, who are very reluctant to place orders back near the top of the order books”.
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