Memecoins
Kaiko reports liquidity increase of $128 million
Trading meme coins has never been easier, thanks to liquidity levels that have reached unprecedented levels. Paris-based data firm Kaiko reports that popular meme coins such as DOGE, SHIB and PEPE now have a combined liquidity of $128 million.
Buckle up, because this wave of liquidity is shaking things up in a big way. Read on to find out how this could impact your next meme coin move.
Understand trading dynamics
Kaiko’s report shows a substantial increase in the liquidity of meme coins, leading to smoother and more stable trading. Increasing liquidity reduces the bid-ask spread, which is the difference between the highest price a buyer will pay and the lowest price a seller will accept. This means better trading prices and lower transaction costs. However, even with increased liquidity, bid-ask spreads for meme coins are still above 2 basis points on most trades, indicating high volatility and persistent perceived risk.
The rise of smaller meme tokens
Smaller meme tokens like DogwifhatMemecoin e Book of Memes, have seen notable growth, with an increase in liquidity of between 200% and 4000%. This surge is partly due to rising prices, highlighting the growing interest in these niche markets.
The risks remain
The increase in liquidity suggests that the meme coin market is maturing, potentially attracting more investors. However, high volatility and wide bid-ask spreads demonstrate that these assets are still risky. Although more market makers are participating, caution is still advised due to the unpredictable nature of meme coins.
Balance the highs with the lows
The surge in meme coin liquidity marks a significant development, making trading these assets easier than ever. However, high volatility continues to pose risks. Meme coin traders should remain vigilant as the market evolves, carefully balancing potential gains with inherent risks.
In conclusion, although increased liquidity is a positive step towards market maturity, meme coin traders should approach the associated risks with caution.
Read also: Cryptocurrency market collapse: here’s why the price of Bitcoin is collapsing!
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