In this article
- Liquidity Meaning In Crypto: Why Does it Matter?
- Top 5 Crypto Assets Worth Considering in 2023
- Tips to Decide on Purchasing the Best Crypto Assets
As a hard-working, goal-oriented, and well-rounded person, I always strive to do quality work for every job I do. Faced with challenging tasks in life, I have developed the habit of thinking rationally and creatively to solve problems, which not only helps me develop as a person, but also as a professional.
Speaking about my professional activities, I can say that I have always been attracted to the study of foreign languages, which later led me to the study of translation and linguistics. Having great experience as a translator in Russian, English and Spanish, as well as good knowledge in marketing and economy, I successfully mastered the art of copywriting, which became a solid foundation for writing articles in the spheres of Fintech, Financial markets and crypto.
As the crypto landscape continues to grow, evolve and adjust to new market conditions, many exciting opportunities appear to invest and build a respectable portfolio. Despite the recent trials and tribulations, 2023 is on track to be a promising year in terms of crypto expansion and price stability. Thus far, the crypto market has experienced several tectonic shifts in the right direction.
From upward price trends and enhanced security to the emergence of numerous value-driven crypto startups, the future looks brighter than ever before. Therefore, the current year might be the best time to reconsider crypto assets as a lucrative investment. This article will pinpoint the critical factors in choosing a perfect crypto investment, including the importance of liquidity and the best available options today.
- Liquidity is one of the crucial factors in determining the best crypto investments on the market.
- Liquidity ensures the stability, reliability and long-term success of cryptocurrencies.
- There are numerous fascinating choices on the market, including flagships like Bitcoin and exciting new projects like Solana.
- Deciding between these options depends on several factors, including crypto platforms’ underlying technology, regulations, security and future aspirations.
Liquidity Meaning In Crypto: Why Does it Matter?
Stability is still a luxury as the crypto landscape enters its second decade of existence and growth. Despite some crucial steps in the right direction, the crypto market volatility remains high and quite risky for potential investors. Therefore, the concept of liquidity has an outsized importance for the crypto market.
What is crypto liquidity, exactly? Liquidity in crypto is the metric of how easily virtual currencies and fiat currencies can be traded on the open market. High liquidity is almost always desirable in crypto Forex markets, as a given digital currency can be exchanged in a matter of minutes — moreover, high liquidity warrants reliable prices, predictable future trends and general stability in the crypto market.
Liquid crypto currencies are less likely to be manipulated or suffer from unexpected price swings. Thus, it is best to choose cryptocurrencies with high liquidity to mitigate the volatility risks in the crypto market effectively. However, it is also essential to understand the depth of liquidity for a given digital asset.
Some cryptos might temporarily surge liquidity levels due to human intervention. Various financial institutions might raise the liquidity ceiling through brokerage services but fail to maintain it as the natural demand for the currency is not consistently high. So, liquidity levels can be deceiving, and it is essential to stay in the loop of recent economic events to understand how reliable these metrics are.
Most Essential Metrics in Choosing Crypto Assets
Aside from the liquidity factor, there are several other core aspects to consider when deciding on crypto investments.
First of all, potential investors need to get a firm grasp on all things crypto. Understanding blockchain technology and all the factors surrounding its market can be a tall order. However, with ample resources on the internet and the help of tools like ChatGPT, aspiring investors can get up to speed in a matter of weeks.
Secondly, investors must realise that the high liquidity of their crypto assets won’t completely absolve them from market volatility. The crypto market is bound to be volatile for the foreseeable future, and investors should take appropriate measures to mitigate these risks. Much like the standard money markets, there are numerous ways to minimise risks in crypto.
From risk hedging, futures contracts and margin trading to simple diligence, investors can employ many tactics to reduce market volatility risks and manage a healthy portfolio significantly. Naturally, it might take some time to adjust for newcomers, and some losses are to be expected, but with enough patience and perseverance, crypto volatility can be shrunk down to a comfortable level.
Lastly, investors need to remember that cryptos are digital assets susceptible to various cyber crimes and digital disasters. Thus, it is important to have various safeguards in keeping the crypto portfolios safe. It is advisable to consider the security measures of a blockchain platform that produces the desired crypto coins. Investors stand to lose the entire currency if the platform itself is compromised. Moreover, investors can also safeguard their investments through cold wallets and other diligent security measures.
Top 5 Crypto Assets Worth Considering in 2023
After identifying the key aspects of choosing a great crypto investment, it is time to discuss the market leaders in this niche. As of 2023, the crypto industry has a lot to offer. From well-established names to promising newcomers, the crypto landscape offers a myriad of choices that can accommodate varying interests.
Let’s discuss further:
To nobody’s surprise, Bitcoin is still going strong after 14 years of uneven success. Despite some bumps on the road, the coin that created decentralised finance remains the creme of the crop. While its growth hasn’t been stable, Bitcoin has still managed to become one of the most valued digital assets worldwide. In 2023, Bitcoin is on a reliable upward trend. While the days of 10X-ing the crypto investments are behind us, Bitcoin is showing a strong 10% annual growth.
It goes without saying that Bitcoin is the most reliable and globally renowned cryptocurrency. It houses the airtight proof-of-work algorithm, ensuring top-notch security for its blockchain networks. As for the question – is BTC liquid? The answer is a resounding yes. The Bitcoin market is highly liquid, with consistently high trading volumes. The biggest crypto investors, including S&P 500 companies, utilise Bitcoin as their go-to trading currency, a significant green flag for the entire industry.
With such active and consistent trading volumes and large-scale brokers assisting the market, Bitcoin will most likely keep its high liquidity in the foreseeable future. Thus, Bitcoin remains the Coca-Cola stock of crypto assets – stable, liquid, not extremely exciting, but highly risk-averse. With these qualities, Bitcoin is an excellent investment for expert and newcomer crypto investors to enrich or jumpstart their portfolios.
As a close second, we have the much-renowned Ethereum, which is not only a great crypto asset but a go-to option for blockchain developers. While Bitcoin has the upper hand in terms of value, stability and security, Ethereum has confidently conquered the decentralised applications sector on the blockchain market. As of 2023, Ethereum is a dominant choice for development companies to produce new blockchain applications and similar innovations.
This software-friendly ecosystem has made Ethereum extremely popular. Moreover, Ethereum enables individuals and companies to develop highly customised smart contracts, creating endless opportunities for digital commerce and automated contracts. Due to this surging popularity, Ethereum’s liquidity is exceptionally strong. Many experts and traders view Ethereum as a direct candidate to dethrone Bitcoin in the not-so-distant future.
With all these qualities, Ethereum can be an exciting investment opportunity. The future finalisation of Layer 2 proof-of-stake algorithms might further increase Ethereum’s worth. So, the current year of 2023 could be a great spot to buy ETH and never look back.
In the third spot, the crypto market offers an extremely different type of coin compared to the two market leaders. Tether is a stablecoin directly tied to the value of the US dollar. With this approach, Tether has avoided the usual volatility pitfalls plaguing the rest of the crypto market.
Tether has bridged the gap between crypto and fiat currency with its innovative approach to controlling prices. It offers the usual crypto benefits of security, speed, low transaction costs and borderless transactions combined with the price stability of the US dollar. Despite these impressive feats, investors might still wonder – is Ethereum liquid enough to facilitate a healthy market?
To nobody’s surprise, Tether has no problems in terms of liquidity, as it is directly exchangeable with the US Dollar. Moreover, Tether is supported by a massive wave of innovator companies, startups and other organisations, naturally increasing the demand for this technology-focused cryptocurrency.
With such robust features, Tether has skyrocketed into global popularity quickly, and the upward trend continues as of 2023. However, despite its apparent advantages, Tether has made a significant sacrifice. Due to its direct dependence on USD, Tether is no longer a completely decentralised cryptocurrency.
It also requires the involvement of third parties, which goes against the core blockchain philosophy. In addition, Tether is not the most lucrative investment option, as its coin value is pegged to USD. Many investors simply prefer to acquire T-Bills (Treasury Bills) and other reliable securities instead of Tether. Despite these downsides, Tether is still highly valuable, simplifying global transactions and supporting international businesses.
Binance Coin (BNB)
Binance coin is a prime example of a crypto that drastically exceeded initial expectations. It was created by Binance, one of the most popular crypto exchanges in the world. Initially conceived as a simple payment solution for Binance, BNB has catapulted to unpredictable success. Today, it has become a fully-fledged crypto coin, highly valuable and respected in the crypto industry.
In 2023, BNB is traded regularly with ample liquidity and comprehensive support from its founding platform. It is difficult to overestimate how well the BNB managed to grow in a short span of six years. Moreover, the rock-solid reputation of Binance is an excellent sign for BNB, giving investors enhanced confidence in its future.
Last, Solana can be viewed as Ethereum’s younger and more promising sibling. Solana follows the same path as Ethereum, focusing on blockchain’s innovative technology, facilitating the development of decentralised applications and smart contracts. However, Solana creators are not afraid to innovate independently, introducing novel consensus algorithms like proof-of-history (POH). With the POH methodology, Solana has drastically reduced the blockchain network needs, decreasing energy, time, and resource requirements.
While the SOL coin is not tremendously valuable, it has grown astronomically in recent years. With its laser focus on developing blockchain technology, Solana is a great investment for those who believe in the future of crypto. However, is Solana liquid for investment and trading purposes? Despite the promising upside, Solana struggles to maintain sturdy liquidity levels throughout the trading cycles. However, Solana has managed to stabilise the uneven liquidity peaks and valleys in the last year, offering customers a more stable environment to trade in compared to previous years.
It is not a secret that developers and creators have barely cracked the surface of blockchain capabilities, and Solana promises to be at the forefront of upcoming crypto innovations.
Tips to Decide on Purchasing the Best Crypto Assets
As seen above, the crypto market is filled with wildly different offerings. While all of these coins accommodate the above-mentioned metrics of security, liquidity, reputability and relative stability, they differ in terms of big-picture aspirations and structure. It is important to consider several factors in deciding on favourable crypto investments:
Try to See the Big Picture
Each of the above-mentioned crypto coins has its long-term goals, distinct utility token, unique structure, security measures and network algorithms. While these cryptos might not be principally different regarding investment yields, it is important to see beyond the simple price trend economics. Diligent investors would do their best to explore each crypto asset’s core values and future aspirations. Only after that can they understand these coins’ long-term possibilities and potential.
For investors who believe in the blockchain technology upside, Ethereum and Solana might be the best choice. Conversely, many experts believe that coins like USDT might be the future of crypto, seamlessly fusing old and new concepts. Regardless of potential forecasts, it is important to grasp the fundamental values of each coin, letting investors develop stable expectations for the future.
Consider the Entire Digital Assets Ecosystem
Since most cryptocurrencies are directly tied to their founding platforms, they may also rise and fall accordingly. Coins like ETH are highly dependent on the success of the entire digital ecosystem surrounding the Ethereum platform. Ether is the most popular currency for NFT trading, so it is essential to monitor the NFT market to have sturdy forecasts for Ether.
The same goes with most cryptos on the market, and investors need to have a good understanding of underlying utilities, as they can dictate the price changes and overall growth of the crypto coins. Empirically, we have witnessed numerous correlations between cryptos and their relative digital ecosystems. Ethereum is again the best example, following the swift rise and subsequent decline of the NFT market. Thus, it is important to analyse the entire blockchain ecosystem to truly gauge the potential value of a given crypto asset.
Analyse Latest Market Trends
Aside from core values, features and technology, crypto assets are highly dependent on outside factors like regulations, the economy and the global business environment. Each of these aspects can affect the crypto prices massively. For example, the change in regulations might highly encourage or discourage potential investors. Regulations that incentivise higher levels of security are great for the market, but there are many regulations that limit the freedom of crypto owners as well.
In addition to these variables, investors must also carefully consider the overall sturdiness of the crypto landscape. Since the blockchain world is still in its teenage years, the entire market remains to be highly unstable. While 2023 has been a rock-solid year for crypto, unfortunate events like crypto winter can still happen quite unpredictably. Therefore, investors need to stay in the loop of all things blockchain and where the market is headed at any given time.
While the crypto market is no longer as exciting and highly lucrative as in previous years, it has taken giant steps toward becoming a dominant global market. In 2023, the crypto industry showed signs of maturing and stability. The increase in liquidity has played a massive role in this positive trend, as new traders and investors are entering the market. If this positive trend continues and the crypto industry has no shortage of buyers and sellers, crypto could finally reach the initial promise of challenging fiat dominance.