Liquidity problem in cryptocurrency trading

✔️ Information reviewed and updated in December 2023 by Eduardo López

According to experts, liquidity is one of the most important points when it comes to operating on cryptocurrency platforms. This is because liquidity is closely related to the performance of our money and investment opportunities.

So that you are not affected by the lack of internal liquidity, as an investor, or external in the market or the platform, we have prepared this post. Here we will tell you what are the 4 most common liquidity problems in trading. In this way you will be ready to solve these situations.

✨Operate on multiple platforms at the same time

One of the most common liquidity problems among Traders is in trading on several Trading platforms simultaneously. Although this is common since not all platforms have all cryptocurrencies, it is something that we can control.

There are experts who mention that, for example, trading only on one platform could give you $ 100 of liquidity while diversifying could cause you to lose up to 70% of that liquidity. That is why they recommend being very careful regarding the number of brokers in which they operate.

✨ Very small platforms

There have been cases where we only find certain cryptocurrencies available on small platforms to operate. This can pose a great risk to liquidity as these types of platforms tend to be characterized by having very few users. To have few users is to have few operations and also, little profitability.

That is why operating on a very small trading platform can lead to liquidity problems, especially if it does not have large volumes of operations.. It is important to assess the size of the platform and the cryptocurrencies we are looking for to determine if it is really worth taking this risk, especially high spreads.

✨ Very large platforms

Believe it or not, large platforms can also face this type of situation, since a large simultaneous volume of operations can leave them illiquid. Although there are some platforms that offer fixed liquidity, in reality this only happens in some cryptocurrencies such as Bitcoin.

To avoid liquidity problems, especially when selling cryptocurrencies with low transaction volumes, it is to do it in small packages. In this way, you will avoid the lack of liquidity or the problems that the broker can generate by not having a sufficient volume of transactions.


✨Cryptocurrencies ICO

Cryptocurrencies launched at ICOs are another of the most common types of liquidity problems. Why? Because being unknown or new, cryptocurrencies are unlikely to have a high volume of transactions, that is, almost no one will want to buy it, which will leave you with your tokens and zero buyers.

Many experts suggest that when there is a lack of liquidity because nobody wants to buy your tokens from the ICO, it is better to wait. Leaving your tokens in your Wallet will help them gain value until the new cryptocurrency is listed on platforms with more volume of demand.

Eduardo Lopez

Editor and Copywriter

I am Eduardo López Martínez, I was born in Madrid, Spain and I am 48 years old. I am a journalist and I am part of the team. Do you want to know a little more about me? I invite you to read my biography.

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