Coin breakdown by liquidity


Good: coins with high volume, traded in many exchanges [180 coins]
Moderate: coins with moderate volume traded in not that many exchanges [351 coins]
Low: coins with low volume traded in few exchanges [434 coins]
Very Low: coins with very low volume traded in very few exchanges [4457 coins]

Assessing a coin's liquidity

We have introduced a new liquidity metric, displayed on each coin page as well as on our coin lists, using colorful asterisks. Our goal is to highlight coins that have either very low daily trading volume or most of their trading volume is concentrated in very few exchanges.

To understand why this might be a useful metric to look at, let's consider two motivating (fictional) examples:

  • Coin A has a marketcap of $100M, but its daily trading volume is lower than $100. The $100M market cap in this case doesn't really mean much. A trading order with significant volume will most probably move the price (and hence coin A's market cap) significantly. This way anyone can potentially game coin A's market cap and make it appear high on market cap sorted lists. More importantly though, the main issue which needs highlighting here is that it will be very hard if not impossible to buy or sell a significant quantities of coin A (at least anywhere near the listed price).

  • Coin B has a marketcap of $100M and a daily trading volume of $1M, coming from a single exchange. Given the loosely regulated nature of most exchanges, we should always keep in mind that any exchange can be reporting fake numbers or simply just cease trading of any coin at any given time. So, coin B's liquidity is very fragile due to the fact that it is only traded in a single exchange.

To address the above we've come up with the following:

  • Compute a score for every exchange using the following formula:

    Log( C0 + twitter_followers / max_twitter_followers + C1 * min_traffic_rank / traffic_rank )

    C0 and C1 are weight balancing constants. Currently we use Alexa for traffic ranks.

    Note that we try to base our exchange scoring formula on inputs (twitter followers, traffic rank) that cannot be easily faked. We can obviously use more signals but we found that the above formula produces pretty reasonable results.

  • We score each coin's trading liquidity using the following formula:

    Σ for every exchange [ min(exchangeX_total_volume24h, total_coin_volume24h / C2, C3) * exchangeX_score ]

    C2 and C3 are constants. C2 represents an acceptable minimum threshold for the number of exchanges a coin is traded on and C3 puts a cap on how much any single exchange can influence the liquidity score.

    The main thing the above formula tries to do is place a high score on coins that have:

    • high trading volume
    • well balance among multiple exchanges with high exchange scores

Disclaimer

A coin might appear to have potentially low liquidity on Coinlib because we might have not listed yet one or more exchanges that it is trading on. We do our best to keep adding new exchanges, however keep in mind that an exchange with low score will not contribute significantly to the liquidity of a given coin. Also, the exchanges traffic rank and twitter followers might not be the best signals for scoring an exchange, but it produces very reasonable results for the most part. We are open to suggestions.