According to Kaiko research, Binance has once again emerged as the leader in liquidity among 43 surveyed exchanges in Q2 2024. Following Binance, Bybit and Coinbase took the second and third positions, respectively, while UpBit and HTX secured the fourth and fifth spots.
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Liquidity is important for exchanges as it directly impacts trading conditions, reducing slippage and lowering execution risks. Various metrics are used to assess liquidity, including trading volume, volume contribution, and market depth.
Binance remains dominant in trading volume
Binance’s lead in liquidity is primarily driven by its massive trading volume and market depth. According to Kaiko, Binance consistently registers the highest trading volume among the top 10 exchanges, far surpassing its competitors. For instance, Binance’s trading volume is four times higher than Upbit’s, which ranks 10th overall despite its high volume.
The variety of assets available on Binance also plays a significant role in its liquidity. Binance offers twice the number of assets as Upbit, contributing to its superior trading volume. However, it’s worth noting that a larger selection of assets doesn’t always translate to greater liquidity. For example, LMAX, which offers only five assets on its spot trading platform, boasts the highest average market depth among the top 10 exchanges.
LMAX, serving mainly institutional clients, requires greater liquidity for larger trades. This allows it to absorb large orders without significant price impacts. On the other hand, Binance’s average depth may be affected by small-cap liquidity.
Binance handles large volumes better than all
Despite its huge asset range and high trading volume, Binance maintains a high-quality order book. This ensures that large trades can be executed with minimal price impact, a key factor for maintaining liquidity.
According to Kaiko, this ability to handle large volumes efficiently sets the exchange apart from other exchanges. While also performing well, Bybit and Coinbase lag behind Binance in these important areas. Upbit and HTX, despite their high rankings, show lower market quality scores, reflecting a less favorable trading environment.
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Exchanges like LMAX excel in market depth despite their limited asset range due to their focus on institutional clients. Interestingly, LMAX’s depth trend correlates with major institutional news. For instance, there was a significant increase in November 2023 when discussions around the approval of US bitcoin ETFs began to gain traction. Another spike happened in February 2024, further emphasizing the influence of institutional developments on market depth.
Cryptopolitan reporting by Jai Hamid
