Bitcoin Liquidity: A Guide for Institutional Firms

Bitcoin Liquidity: A Guide for Institutional Firms

Many institutional investors are intrigued by the opportunities present within the crypto finance markets but are unsure about the liquidity of bitcoin and other crypto assets. Specifically, they express concern about their ability to effectively open and close large positions. Strategic Coin desires to help institutional investors flourish in this burgeoning ecosystem, which is why they have created educational resources and in-depth market research reports tailored specifically for investment firms.

Below, this guide explains the degree of liquidity within the bitcoin markets:

A Guide to Bitcoin Liquidity

For an asset to be truly liquid it must be easily converted into other assets, and the market must be stable enough that one can quickly buy or sell large amounts of an asset without causing a significant effect on its price.


Bitcoin passes the first test with flying colors. Like all cryptocurrencies, it can be exchanged within seconds or minutes, and it can be bought or sold at hundreds of domestic and international bitcoin exchanges, including Gemini, GDAX, and Bitfinex.


However, the bitcoin markets are still maturing, so they are not always stable enough for firms to place sizable buy and sell orders without affecting the bitcoin price, but the climate is improving at a rapid pace.

Bitcoin volume has improved astronomically in 2017, rising along with the general trajectory of the bitcoin price. A year ago, bitcoin posted a single-day trading volume of less than $46 million. By the time of writing, bitcoin was consistently posting trading volumes above $1 billion and occasionally higher than $2 billion. In fact, Exante Data CEO Jens Nordvig predicts total cryptocurrency trading volume will soon surpass that of Apple, the most liquid common stock.

bitcoin liquidity
Bitcoin Price & Trading Volume Chart from CoinMarketCap

That said, bitcoin is somewhat-less liquid than its trading volume suggests because this volume is spread across multiple exchanges and currency trading pairs. For example, on the day this article was written, bitcoin volume only surpassed $100 million on one exchange.

bitcoin liquidity
Bitcoin Trading Volume Broken Down By Individual Trading Pairs

Moreover, five different five different currencies appear in the list of bitcoin’s 10 highest-volume trading pairs. Thankfully for U.S. investors, USD trading pairs are the most consistently-liquid of any fiat currency, but investors must still take note of exchange depth charts when calculating a large buy or sell order.

Factors that Suggest Bitcoin Liquidity Will Continue to Increase

Nevertheless, bitcoin liquidity continues to improve over time, and industry observers expect this trend to continue. Ari Paul, a managing partner at cryptocurrency investment firm Blocktower Capital, has forecasted that a “wall of liquidity is coming” to the crypto finance markets. He anticipates that the emergence of dark pools, liquidity aggregators, and bitcoin futures will cause bitcoin trading volume to double by the end of 2017, although he is not confident this increased liquidity will extend deep into the altcoin markets.

To wit, blockchain trading platform tZero–a subsidiary of online retailer Overstock–just announced that it will launch the first SEC and FINRA-compliant ICO exchange as part of a joint venture with fellow crypto finance startups Argon Group and RenGen LLC. Moreover, most industry observers anticipate that the SEC will approve the first Bitcoin ETF within the near future. Finally, exchange and clearinghouse LedgerX is expected to provide access to derivatives as early as Q4 2017.

Strategic Coin is your go-to source for cryptocurrency investment research and education. Whether you need help understanding the basics of blockchain technology or desire to read an in-depth analysis of the latest initial coin offering, Strategic Coin will provide you with the information you need to take advantage of market opportunities within the crypto finance industry.

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