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Token liquidity plummets leaving bag holders high and dry

As cryptocurrency prices continue their downward spiral, a more alarming trend is emerging in the shadows: a severe token liquidity crisis. Despite the allure of bargain prices, trading volumes have nosedived across major exchanges, leaving many tokens gasping for liquidity. This unexpected development is reshaping the cryptocurrency landscape, challenging both veteran and novice traders alike. Our in-depth analysis reveals the extent of this liquidity crunch and its far-reaching implications for the future of digital asset trading.

Volumes plummet despite price drops

Cryptocurrency prices have plunged 80-95% since the year’s start. Yet, traders aren’t rushing to buy at these lower prices. Token liquidity has significantly decreased across major exchanges. 60% of listed cryptocurrencies are trading below January levels. Order books are now heavily skewed towards the sell side. November has seen an acceleration in declining volumes.

Token Liquidity Squeeze: Over 20% of Cryptocurrencies Face Critical Volume Loss

Over 20% of cryptocurrencies that remain listed on major exchanges (see note on examined exchanges) now have less than 90% of the trading volumes they witnessed at peak hype in January. More than half of those are effectively dead in the water with no traders looking to buy.

A Handful of Outliers

On the other end of the spectrum, 102 of 410 tokens have seen volumes increase by more than 100% in January vs October. November however shows that this number now dropped to 91 within less than a month. And the remaining tokens that have found some increase in volume are only a handful.

Token Liquidity Variations Across Exchanges

Liquidity from one exchange to the other differs, however – quite dramatically in some cases. For Poloniex, quite literally all listed tokens have less trading volume than at the start of the year. In the case of Bittrex – three tokens (see interactive chart below). The outliers, by reported volume at least, are OKEx and Huobi, with Binance having a fairly equal share of trading volumes across the percentage bands. Just under half of Binance’s listings have decreased volumes compared to the start of the year.