Liquidity matters…period. For any market to function, especially for a market that operates close to 24/7, there needs to be sufficient liquidity; a real order book with enough depth on both sides of the price war. It is difficult enough to eradicate fragmentation in any market, but an ideal amount of liquidity makes things that little bit better.
On the topic of fragmentation – the fact that the crypto assets market knows no borders; that it is sustained by a number of exchanges and technology that were not necessarily built for such high trading volumes; and that it houses a mix of traders operating under the same roof, all mean that this particular market inefficiency is here to stay for some time.
Regulation, which will likely come in several stages and will most probably not follow a joint, global model, will only exacerbate this issue in the short-term. The evolution of the crypto markets may end up following that of equity markets, and, as time goes by, we may see similar innovations crossing over to the trading of digital assets, specifically when it comes to trading large blocks and OTC.
One thing that must improve urgently, however, is the liquidity behind stablecoins; otherwise, these products may become nothing more than a credit risk, not only to the holder that decided to exploit the apparent “stability”, but to the exchange itself that decided to offer it. Everyone is always quick to pick at Tether (USDT) – but, unlike many other stablecoins, the USDT offers plenty of liquidity, split across a number of exchanges. So, while USDT holders may still bear credit risk associated to the coin itself, they will at least be able to diversify their risk related to the vendor (the events in Canada are a good reminder that the crypto market has a long way to go).
You may not get an audit report that you can trust enough, but at least there is plenty of liquidity of trading volume:
Thank you for reading,