Once speculative assets in the risk-on asset zone, Bitcoin and Ethereum are now acting like large-cap stocks in the traditional stock market. S&P released a report recently saying that frontline crypto funds will now behave like highly liquid equity assets.
Lean bid-ask spreads, reduced slippage, and close alignment with institutional inflows are incremental changes that could be observed.
These are green flags, suggesting the market is maturing. However, the S&P Global report also observes that the crypto market is still disintegrated at a broader level. It is less liquid than you think and still sensitive to sudden external shocks.
BTC and ETH are Acting Differently
Why does liquidity matter in an investment market? Liquidity enables you to convert your assets into stablecoins or cash without losing much asset value. Most efficient markets can minimize the loss to a great extent!
On that note, BTC and ETH behave differently from the other crypto tokens. According to a report by S&P Global, BTC and ETH have much narrower bid-asks compared to many of the S&P 500 stocks. The traders also experience a very low slippage rate.
These features are the same as those of large-cap tech stocks. Hence, BTC and ETH are making the crypto trading environment more mature and stable. However, another grave concern still lingers.
Volumes Paling!
The crypto volume is still low. Compared to the traditional markets, it is not much. However, the two mentioned tokens only stand apart from the rest. Even then, their trading volumes are belittled by stocks on the NYSE. Their trading activities are 10x more.
Spreads Suggest High Liquidity in The Frontline
BTC, ETH, and USDT suggest wider spreads than Apple. That means the friction level in trading is quite high. However, compared to popular tech stocks like Broadcom, digital assets often show tighter spreads.
Stablecoin-Fiat Markets Still Need Major Upgrades
The EUR-USDT trading pair suggests limited depth. Less than €5 million is available against 1%, and €8 million is available against 10%. In comparison, the USDT pairs are more liquid.
The crypto-USDT pairs are nimble and more liquid because they don’t depend on the banking system or regulatory constraints.
