Mid-Level Crypto Coins And Generally Precarious Liquidity Dynamics

Crypto Ecosystem Beyond The Top 15 Coins Is Much Smaller Than Reported
Mid-Level Crypto Coins And Their Generally Precarious Liquidity Dynamics
Coins outside of Top 10 only 10% of the total crypto market cap
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day

CRYPTO MOVERS AND PRICES

 

 

CRYPTO STORY OF THE DAY

We Wanted To Address The Mid-Level Coins And Their Generally Precarious Liquidity Dynamics - Overall, The Widely Quoted 'Market Caps' Are Not Indicative Of Where Any Kind Of Size Can Be Sold - Marked-To-Liquidity The Crypto Ecosystem Beyond The Top 15 Coins Is Much Smaller Than Reported
 

For example purposes, let's consider Zcash (ZEC), a relatively well-known crypto which has a market cap (price x coins in circulation) of USD ~220M, making it the ~30th largest. At the height of the 2017/18 rally, Zcash had a market cap of over USD 2.5B and traded 10s of millions in volume a day. Now, a quick look of the markets where it is traded on coinmarketcap show a series of pairs which, as usual, are well known to be untrustworthy. The most active trustworthy pairs are ZEC/BTC and ZEC/USDt traded on Binance. An investigation of those order books shows an extremely 'thin' situation. In the ZEC/USDt order-book, a sale of USD 150k equivalent would move price down in the range of 20%. In spite of seeing slightly higher volumes on the session, the ZEC/BTC order-book is even more thin. The most active, trustworthy, crypto/fiat pair in ZEC/USD is on Bitfinex (BFX) which has only posted USD 70k in volume in the last 24-hours. Other exchanges such as Gemini, Kraken and Coinbase have posted similar volumes to BFX with order books thinner than those of Binance.
 

Crypto Takeaway: If spot market liquidity has shrunk in BTC, the situation is magnitudes worse in the mid-level alt-coins. While marked-to-market versus marked-to-liquidity is a consistent debate in finance, the situation is particularly troubling outside of the Top ~15 cryptocurrencies. Furthermore, for the most part, these protocols have limited treasury or earnings potential that could act as a back-stop for buybacks were mass liquidations to occur from large holders. Coins outside of the Top 10 only make up 10% of the total crypto market cap or about ~20B using top of book prices. Those values,  deserve to be severely haircut.

About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets.