The latest report by Kaiko, The Q3 Token Liquidity Rankings, has disclosed that some crypto assets had improved market caps but deteriorating liquidity while XRP had its market cap in line with the liquidity.
According to them, the market cap alone is a very poor metric for assessing the performance of crypto assets. 

XRP had a lot of ups and downs in 2023 with the key highlight of the year being the partial victory against the US Securities and Exchange Commission. The asset established itself as the second crypto behind Bitcoin which has regulatory clarity in the US. Within the year, XRP managed to get back on most exchanges that had earlier delisted it shortly after the legal showdown was announced.

This propelled the asset to a little over $0.9 before pulling back to its current price level of $0.619755. In the past three months, XRP has only managed a 21% surge. The asset is also 3% down in the last seven days and 1.19% down in the last seven days. 

          

Analysts have also observed that the asset could be hitting a bullish market sentiment with December’s 2.78% price surge. Regardless of its disappointing price movements, some experts are reluctant to label the year a failure. 

In a report published by a leading analytics platform Kaiko, an interesting insight was provided on the top 40 cryptocurrencies with a specific focus on XRP. According to the report, market capitalization is a very poor metric to understand the liquidity of a token. Instead, liquidity, trading volume, and market depth should be the main focus. 

As mentioned in previous rankings, it’s our contention that market capitalization is a flawed metric, and a ranking of liquidity is more representative of a token’s true value.

Findings of the Report Featuring XRP and Other Assets

The Q3 Token Liquidity Rankings disclosed that Bitcoin (BTC), Ethereum (ETH), and Ripple’s XRP emerged as the top three tokens based on Liquidity. Shiba Inu (SHIB) and Avalanche (AVAX) fell from their previous quarter’s ranking to 21st and 23rd respectively.

Bitcoin Cash (BCH) emerged as the top gainer in the quarter. Bitcoin and Ethereum were also the top two biggest tokens by both liquidity and market cap. BnB fell by two spots from the previous quarter to rank 8th by liquidity. 

The report further observed that XRP, DOGE, ADA, and SOL had their liquidity performances perfectly in line with their market caps. Litecoin (LTC), however, outperformed its market cap as it ranked 5th by liquidity. The top underperformer was Toncoin (TON) which was ranked 9th largest crypto by market cap but 37th by liquidity in the third quarter of 2023. This asset interestingly had its market cap ranking moving from 12th to the 9th position within the period. 

The underperforming assets by liquidity were reported to be “SHIB, TRX, DOT, UNI, AVAX, ICP, QNT.” The outperformers also included “BCH, XMR, ETC, FIL, APT, MNT, NEAR, OP, AAVE, GRT, and ALGO.”

The performance of SHIB is said to be an example of how “fickle the market for non-DOGE meme coins can be”. Its liquidity deteriorated while maintaining the position for its market cap. 

The report stated:

This quarter we’ve included two different market depth levels – 0.1% and 1% – to provide a more holistic view; 0.1% is more relevant for higher frequency traders while 1% is more relevant for longer-term holders. We’ve also reintroduced spreads, this time taking the median spread across all exchanges. Average daily volume is again included while exchanges are a new metric that provides points based on the number of liquid exchanges for each token.

 

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Filed under: Bitcoin - @ January 1, 2024 4:53 pm