High Volume Doesn't Mean Liquidity: New Kaiko BTC Exchange Report


High Volume Doesn't Mean Liquidity: New Kaiko BTC Exchange Report

Comparing data on volumes and liquidity at the world’s largest bitcoin exchanges reveals interesting ranking results, according to the soon-to-be released Bitcoin and Ethereum Market Report by Kaiko.com.

Also read: Bitcoin.com & Kaiko: ‘Best Available Data’ for All Your Bitcoin Needs

Volumes, Orders and Liquidity

Bitcoin Liquidity

Until now, the Bitcoin industry has determined the size and market share of these exchanges by examining trade volume data, which is generally supplied by the companies themselves. Given the varying methodologies employed by different companies to record this information, and the fact that trades represent past prices and not available offers, it may not always offer the most accurate price of bitcoin.

To solve this problem, we examine each exchange’s actual order books, to assess liquidity for extra price accuracy. We define “available liquidity” as the amount of bitcoin a user could trade (in theory) without shifting the price more than 1% up or down.

This information is then combined to publish Kaiko’s Bitcoin Price Indices for a more reflective global price and local currency indicators.

How the Exchanges Rank, and Why

Particularly noteworthy, Kaiko has found, is the placement of large Chinese exchanges on our BTC-USD pair rankings. These exchanges typically place highly in terms of total trade volumes, but available liquidity is lower – suggesting algorithmic trading, but in smaller amounts per trade.

Kaiko Exchange Ranking Bitcoin Liquidity

The top three exchange positions over the past six months – based purely on BTC-USD trading volumes – are  Huobi, Bitfinex and OKCoin.

When liquidity is taken into account, however, the top three are Bitfinex, itBit and Bitstamp. To calculate a final ranking index, Kaiko considers both volumes and liquidity, giving 70% weighting to liquidity and 30% to volumes.

Bitfinex moved up from the #4 position in December 2015 to consistently rank #1 on Kaiko’s weighted index – followed by itBit and Huobi, which have placed between #2 and #4 over the same period.

High-volume bitcoin traders, it appears, still prefer the less-regulated markets in Europe and Asia.

OKCoin‘s USD ranking slipped from the top spot last December to its current fifth place.

Other exchanges listed on Kaiko’s index are BTC-e, Coinbase, Gemini, and Kraken. Though the Winklevoss-owned Gemini has moved ahead of Coinbase since the beginning of May, US-based BTC-USD exchanges hold the three lowest places of the nine Kaiko has ranked. High-volume bitcoin traders, it appears, still prefer the less-regulated markets in Europe and Asia.

More Reports to Follow

Kaiko’s exchange report is the first in a series the company is producing to give an accurate, statistics-based overview of the digital currency industry. Over the coming months, more reports will be published to examine other sectors of the bitcoin industry, such as mining.

The initial report, focusing on the exchange industry, will be available for purchase on the Bitcoin.com Store and on Airex Market from June 15th, covering the period December 1st 2015 to May 31st, 2016.

The report looks at the currency pairs of most interest to the digital currency industry at the time of publication: BTC-USD, BTC-EUR, BTC-CNY, ETH-BTC, and ETH-USD.

All underlying data from the report is also available for purchase, should anyone in the industry wish to re-crunch parts of it.

About Kaiko

Pascal Gauthier Bitcoin Liquidity
Pascal Gauthier

Kaiko launched in 2015, with a stated goal to become the Ultimate Data Source for Bitcoin. Its mission is to organize Bitcoin’s information to help businesses succeed by providing data, insights and services.

Over the past year we’ve been happy to cooperate with premier sites like Bitcoin.com and BitMEX to supply price and other network data charts, with the aim of helping bitcoin and digital currency users make better decisions.

The company now has eight staff and is looking to hire more talented data professionals and developers at its headquarters in Paris.

Author: Pascal Gauthier

What do you think about these recent market figures? Let us know in the comments sections below! 

Tags in this story
BitFinex, BitStamp, BTC-e, China, Coinbase, Gemini, Huobi, ItBit, Kaiko, Kaiko Report, Kraken, Market Data, OKcoin, Pascal Gauthier, Winklevoss Twins

Images courtesy of etftrends.com, Kaiko, insurancejournal.com.

Pascal Gauthier

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