Wed. Oct 27th, 2021

If you open a cryptocurrency brokerage or want to add cryptocurrencies to your marketable asset offering, you will need liquidity cryptocurrency. In this article, we explain how it works and how to get the best option for your business.

The liquidity of cryptocurrencies is explained

As you would agree with any broker, Crypto liquidity providers or “Market Makers,” as some like to call them, are an essential part of any broker’s operation. Regardless of the marketable instruments you offer your clients, whether they are Forex, CFD, futures, commodities, etc., it is necessary to ensure them reliable and solid liquidity.

In general, the main goal of crypto-liquidity is to allow the trader to buy and sell traders with ease. For cryptocurrencies, liquidity means the measure of ease in converting a currency into a fiat currency (USD, EUR, etc.) or other cryptocurrencies.

Simply put: when there is little liquidity, there is high market volatility, which leads to rises in asset prices. Conversely, when liquidity is high it means that the market is stable and that price fluctuations are smaller.

When the market is liquid, buying and selling cryptocurrencies is easier for the trader, as there are higher volumes of trading activity, so orders can be executed faster. Since the Crypto market is one of the busiest markets available today, when liquidity is high it means that traders enter a position or exit at any point.

Advantages of strong cryptographic liquidity

The best case for all people involved in trading is when the market is highly liquid. It means better prices for brokers and traders, as the number and size of buyers and sellers create a balanced price for the instrument, which all participants can be satisfied with.

More importantly, it also guarantees stable market prices, with no major differences in short periods of time. When prices are stable enough, the market can support large orders without significant hikes or changes. In this case, brokers can offer fast and smooth execution for a larger number of customers and for larger orders.

Another notable advantage of high liquidity is the ability to perform more accurate graphical analyzes in the market, as in a stable market technical analysis tools would be more accurate.

Which drives liquidity cryptography

There are several factors that determine the level of liquidity of any cryptocurrency.

Negotiation volume

A brief look at CoinMarketCap or any other currency ranking website will show you the daily volume of each currency in the market. The trading volume indicates the number of people buying and selling the currency and the sizes of their positions, making it a key factor in deciding the level of cryptocurrency liquidity.

With the explosion of Crypto exchanges in recent years, more and more people gained easy access to Crypto trading. The increase in trading volume, especially for major cryptocurrencies such as Bitcoin and Ethereum, was key to improving its liquidity.

Market acceptance
Another important factor driving Crypto liquidity is adoption. As cryptocurrencies are increasingly accepted for transactions on more and more platforms, their liquidity grows. For this reason, it is essential that Bitcoin and other currencies be accepted as payment methods by more merchants around the world.

Regulation

The regulation of cryptocurrencies varies between different jurisdictions, as all countries encourage a different attitude towards cryptocurrencies, from almost complete acceptance to ambivalence to complete prohibition.

Whatever the legal situation, cryptocurrencies continue to grow rapidly, forcing the authorities to take a clear stance to provide consumer protection and create a fair tax plan. As more countries jump on the bandwagon, the inevitable result would be wider acceptance, higher trading volumes, and greater cryptographic liquidity.

How to choose the best cryptographic liquidity

For Crypto brokers, choosing the most appropriate liquidity provider is to assess their unique needs among several factors:

Instruments

The first thing to keep in mind is the selection of instruments you plan to offer to your traders. Whenever you choose a liquidity provider, the best option is always one that offers you liquidity for various assets, combined with access to the FIX protocol and historical data. You need to look at whether the provider can convert your desired currencies into fiat money and back, and what selection of cryptocurrencies and tokens it accepts.

Volume

The number of orders at each price for a given currency determines its “Market Depth,” a key factor to consider when looking for liquidity. The depth of the market that your supplier offers for any particular asset is an indication of your stability as a supplier.

Execution speed

A good Crypto liquidity provider should be able to execute transactions quickly with minimal budgeting and slippage, especially during news events that cause a major impact.

Prices

Your LP’s bid should have competitive differences, low commissions, and low swaps without compromising either party.

Price feeds

Your provider’s data channels must always be stable and reliable. The price feed should add up the prices of all the relevant stock exchanges and the Forex market in real time. If price data is not delivered on time in a matter of failed seconds, the result would be an unacceptable lack of pricing.

Technology

An advanced Crypto liquidity provider must be able to offer connection to the FIX protocol, as well as other APIs, integration with MT4 and other trading platforms.

Take advantage: your first choice for liquidity encryption

As cryptocurrency trade becomes more popular, more and more brokers are looking for a reliable and trusted cryptocurrency liquidity provider. With over 12 years of experience in the market, Leverate is the leading supplier that marks all the boxes for early foreign exchange brokers and major brokers.

LXCapital: Leverate’s cryptocurrency liquidity solution, uses the most advanced technology to provide brokers with the most appropriate liquidity for every need. Regardless of the currency you want to offer your traders, with LXCapital you can offer them the best price at any time, with a minimum slip and zero gaps.

LXCapital combines the liquidity of major Crypto exchanges to determine the most accurate price of each currency in a fraction of a second. This allows Leverate to offer low spreads, minimum commissions, extremely high execution speed and zero rejections. All this is possible thanks to a powerful engine that processes a large number of orders in a second.
Leverate’s Crypto liquidity enables connectivity to MT4 and Leverate’s Sirix trading platform, available on computers, web and mobile. The connection to Leverate’s Crypto liquidity solution is very easy and all the technical part is done by our qualified developers, who also offer constant training and support.

But most importantly, we understand that no equal corridor is created and that everyone has different needs and desires. For this reason, we offer a fully tailored liquidity solution, which can meet any demand. Regardless of what you want to offer your merchants, our solution can be configured according to your liquidity specifications.

As our vice president of sales, Maoz Tenenbaum, says: “The most important thing to consider when choosing a Crypto liquidity provider is a solid and reliable technology provider who not only has the connections appropriate, but also have a personal interest in the success of their associates. We are always happy to help new and veteran runners with accommodating Crypto on offer. It is mutually beneficial! ”

Aaron Miller



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