Factors influencing liquidity in cryptocurrency exchange software

by Anna Lisbeth Blockchain Analyst

Liquidity is one of the critical factors behind the success of every White label cryptocurrency exchange. It holds the glue between traders, investors, and the market. Despite new exchanges emerging from different countries frequently, not all of them have adequate liquidity. With an increase in the number of users, exchanges need to have financial prowess built to settle transactions, meeting demands of buyers and sellers, and effective management of trade. Higher the liquidity, the more substantial would be user engagement. 

In this article, we will analyze the importance of Liquidity and the challenges to it in a Cryptocurrency exchange software.

Significance of Liquidity 

  • Helps in determining fair prices - A system with a large number of cryptocurrency traders and a consistent trading activity will help realize competitive prices.  Market stability will be ensured in the form of equilibrium as both buyers and sellers bid at high prices satisfying their respective positions. Consequently, this will lead to the strengthening of the financial system.

  • Faster transactions - Speedy transactions will take place through regular demand and supply, leading to the faster settlement of orders. This can lead to the creation of a better trading experience and promote higher user retention.

  • Helps in technical analysis - Expected trends in future prices can be determined based on the analysis of past data using graphs and charts. Market movement can be estimated in a better manner using calculative tools. Higher liquidity would ensure better analysis in the volatile world of a cryptocurrency exchange software.

Obstacles to Liquidity

  • Trading volume - White label cryptocurrency exchanges with low trading volume due to market fluctuations will have poor liquidity. It also has a bearing on the value of a crypto coin. Liquidity will boost with greater trading volume and busier activity on the exchange.

  • Acceptance - Despite widespread coverage of cryptocurrencies across the world, there is still a hesitance to use this speculative tool. More credibility is needed to improve acceptance rates. The acceptance of virtual currencies by leading multinational companies and governments can prove to be a gamechanger. Clear regulations and stipulated guidelines must also accompany acceptance.

  • Regulations - Different sets of rules and regulations in different countries can trigger confusion and ambiguity among investors. This will have a direct effect on liquidity. Some countries are playing it safe by banning cryptocurrency, which can have a widespread impact on the industry.

  • Listing of cryptocurrencies -  New exchanges which do not offer much cryptocurrency options will not attract investors and cannot sustain in the long run. If more cryptocurrencies are listed, it will help in increasing the number of orders.

  • Payment options - Cryptocurrency exchanges will have investors from a wide range of fields. Limited payment methods will limit the functioning of your exchange. An increase in the number of users can occur if widespread payment options are offered like a credit card, debit card, Paypal, Worldpay, and crowdfunding.

  • Availability of trading features - Interactive trading atmosphere with the latest market knowledge, multiple wallet integration, variety in trading pairs with calculated spreads, and competitor analysis through comparative graphs will go a long way in improving liquidity.

To obtain consistent liquidity for your cryptocurrency exchange, get in touch with the skillful developer team at CES. Our expert advice will help in objectively analyzing the market and improve your business prospects by many notches.

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About Anna Lisbeth Freshman   Blockchain Analyst

3 connections, 0 recommendations, 28 honor points.
Joined APSense since, April 6th, 2020, From Chennai, India.

Created on Jul 6th 2020 01:54. Viewed 189 times.


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