Blockchain-based cryptocurrencies are the best innovation of the 21st century and this opened a great opportunity for all the crypto traders to look towards white label cryptocurrency exchange.
If you are an owner of cryptocurrency exchange and expecting to excel exchange then instead of focusing on providing advance features, your focus should be on increasing liquidity of the exchange.
But do you know what is liquidity and how to increase this and what impact or importance it has in the success of any exchange? If not then here are detailed ideas around all the queries.
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What is Liquidity on Cryptocurrency Exchange?
If summarize the whole concept in one simple term then liquidity is the ability of any financial asset to be converted into other commodities or cash instantly.
Let me give you an example of Gold and cash or shares or stocks, these financial assets can be exchanged immediately for other goods or assets, hence easy to liquidate.
However, assets like real estate will not be exchanged easily for any financial goods or commodities means not easy to liquidate.
These two examples will give you an idea that gold and cash has more potential to exchange immediately as it has very high liquidity, however, the real estate is having less.
A similar way in the cryptocurrency world, if you are trading on any exchange and willing to buy or sell your crypto for another crypto then the very best thing which needed is the trader who is ready to buy-sell the same asset.
The more traders participate in trading the more ability of any cryptocurrency to buy or sell immediately and that is what we call the liquidity of any exchange.
Now let’s focus on why we need liquidity on any cryptocurrency exchange?
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Why White Label Cryptocurrency Exchanges need to Increase Liquidity?
Exchange brings all traders together and provides them a common platform to trade but they should have some reason to trade and the very basic thing is enough liquidity on the exchange.
Here liquidity means enough orders to buy or sell cryptocurrencies, now let deep dive and try to find the key factors.
Fair and competitive Prices
The general concept of economy says, if you want to buy goods at fair prices then the market should have enough supply to fill the demands.
So liquidity brings enough supply on an exchange, where multiple traders are placing multiple orders which cause the prices will be very competitive and fair enough.
If you willing to buy any cryptocurrency and multiple sellers have already placed bids close to your demand then you have options to choose the best bid for yours.
Less Volatile and stable price
No one can ignore the truth of the highest volatility of the crypto market, where the Bitcoin itself swings around 10-20% daily variations in terms of price.
Hence on any exchange, if any trader is willing to place any sell order and already a trader in place to buy that asset immediately will give stability in terms of price.
Ideally, based on market emotions the trends will be either bullish or bearish in nature which can be avoided by having liquidity on any exchange.
Instant and Quick Transaction
The cryptocurrency exchanges are well known for spot trading where the currencies are traded and exchanges immediately once the orders have been fulfilled.
If an exchange has liquidity, which in result all pending or future orders will be settled immediately and the respective cryptocurrencies will be transferred to their wallets immediately.
If till this point you are with me then I can say you have a good idea of what is liquidity and why this is important?
Tips to Increase Liquidity on Exchange
Liquidity comes from the traders as no one is willing to trade unless they have any strong reasons to trade.
There may be few traders who are expecting to hold their positions for the long term in the hope of increase price so you need to give them a reason to trade and here are the bonus tips to work on.
Run Promotional Offers
Running promotional offers on the exchange will definitely grab traders’ attention. So why not run a window of trading where traders get rewards for trading such as
- Free Airdrops of a specific cryptocurrency.
- No trading fees in the promotional window.
- If exchange support IEO (Initial Exchange Offering ) then give those traders priority.
The above three are just a couple of ideas, based on the trader’s behaviors you should timely introduce a random promotional offer which gives them a reason to liquidate their holdings.
Addition of More trading Pairs and cryptocurrencies
Almost everyone is familiar with Bitcoin(BTC) and Ethereum(ETH) but very few knew that there are more than 2000+ active traded cryptocurrencies and definitely the holder for the same.
According to the stats taken from Statista, currently, more than 48 million active blockchain wallet holders.
So the exchange must be listed with around 50% of total cryptocurrencies and exchange should have trading markets as listed below.
- Bitcoin Market (BTC)
- Ethereum Market (ETH)
- USDT Market (Stable Coin)
Trading markets will give them the freedom to exchange with the major currencies and lower the risk of volatility.
Minimizing the Trading Fees
Ideally, trading fees are the revenue for the exchange owner and also the strong reason for any traders to trade with any exchange.
The existing trading fees charged by any exchange is in between 0.1% to 2%. So on your exchange fees must be competitive to others’ exchange.
The minimum trading fees will encourage traders to place small to high orders without any second thought.
Wrapping up with Liquidity on Exchange
If you ask me simple rules to improve liquidity on the exchange then run some promotional offers and reduce the trading fees are the key points to grab the trader’s attention.
You may introduce advanced features with exchange but it does not make any worth unless you have liquidity and all suggested ways are efficient enough to maintain liquidity on any exchange.
Always try to debug the trader’s intention and you will get your best approach to the exponential growth of the exchange.
I hope you enjoyed reading my article on White Label Cryptocurrency Exchanges. Thanks for reading. If you have any queries or suggestions in regards to this article (3 Reasons Why White Label Cryptocurrency Exchanges have to Increase Liquidity?) then, please send a direct message using any of our social media handles.