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Only 2% of crypto currencies are sound to be converted into assets or cash: study

Only 2% of crypto currencies are sound to be converted into assets or cash: study

New Delhi: Amid the high volatility in crypto market, a new study has found that only 2 percent of crypto currencies have healthy liquidity, whereas almost 90 percent of currencies have a low trading volume.

According to the data compiled by BitStacker, There are only 153 crypto coins with high volume that are traded in many exchanges. In contrast, there are 5,886 cryptocurrencies with very low volume that are traded in a very small number of exchanges

This reaffirms the fact that there is unequal balance of trading volume among the thousands of cryptocurrencies and it provides a warning against speculating on crypto coins with a low liquidity, the report mentioned.

"The fact that so many cryptocurrencies suffer from a low liquidity or trading volume is another reminder of how risky it can be to speculate in some of the smaller crypto coins," said Kris Lucas, a analyst.

"After all, there is nothing stopping an unregulated cryptocurrency exchange from creating statistics that overvalue a particular coin," he added.

The researchers tracked 6,656 crypto coins, and only 2.30 per cent of these cryptocurrencies were categorized as having a good liquidity.

Liquidity is a term used to refer to the trading volume of an asset. The liquidity metric used in the study aims to highlight those crypto coins that have a low daily trading volume, or those cryptocurrencies where the trades take place in a very limited number of exchanges.

"Such an understanding of liquidity is useful in that it can explain more than something like market capitalization. In particular, it can help traders understand when it might be difficult to buy or sell significant quantities of any crypto coin," the report said.

-IANS Inputs

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TAGS:Cryptocurrencycryptocrypto market
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