Kaiko has released a portion of an upcoming report which shows the differences between bitcoin exchange volume and liquidity, explaining that just because an exchange may have a good amount of volume, it doesn’t mean they have good liquidity. Both are factors which are taken into consideration for determining an exchanges overall demand and strength in the market.
Kaiko, which launched last year, is a comprehensive resource for bitcoin data, with real-time charts and prices. In the preliminary report which was released to Bitcoin.com, it compares data on volume and liquidity at the largest bitcoin exchanges revealing interesting results.
In the report it covers two main areas:
Volume is simply the amount of bitcoin (BTC) traded on an exchange for any given time period in the past. For example, you may say that Bitfinex traded 20,000 BTC over the past 24 hours. That is their trade volume which occurred already.
Liquidity is the amount of bitcoin (BTC) that is currently available to trade on the exchange at any given time. The difference is that it’s volume that is available now, not in the past tense. For example, you may say that Bitstamp has an order book of 5,000 open trades waiting to be filled.
In the report it shows that Chinese bitcoin exchanges typically have the highest exchange trading volume. However their liquidity is typically lower, suggesting algorithmic trading. According to the stats provided, the top three exchange positions over the past six months based on BTC-USD trading volumes are Huobi, Bitfinex and OKCoin.
When liquidity is taken into consideration, the top three exchanges change to Bitfinex, itBit and Bitstamp. To calculate a final ranking, Kaiko considers both volumes and liquidity, giving 70% weighting to liquidity and 30% to volumes. Bitfinex moved up from the number 4 position in December 2015 to rank number 1 on Kaiko’s weighted index, followed by itBit and Huobi.
Volume and liquidity are just two factors that go into ranking bitcoin exchanges. There are subjective considerations that need to be accounted for, which can’t be measured with numbers. These are called the human elements. For example, design interface and usability, customer experience/feedback, product offerings, programs, competitive pricing/costs, and so on. All of these feed into the overall rating an exchange may receive. The human ratings are used on BitcoinX, where if you look at any exchange there is a rating system where you can give a rating to an exchange based on your own personal experience. The exchanges with the highest ratings float to the top of the rankings list.
When we looked at the top bitcoin exchanges this past spring, we saw that the top three based on human feedback were 247exchange, Independent Reserve, and Kraken.
The rest of the Kaiko report will be released after June 15th, covering the period December 1st 2015 to May31st, 2016. The report will be available for purchase on the Bitcoin.com Store and on the Airex Market.