What is cryptocurrency liquidity and how is it calculated?

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The cryptocurrency market does not tolerate inaccuracies in understanding basic mechanisms. The strength of an asset lies in its ability to instantly transition from a state of ownership to its monetary equivalent without any loss of value. Therefore, the question of what cryptocurrency liquidity is is on par with the analysis of volume, capitalisation, and volatility. The parameter shows not the theoretical capacity, but the actual capacity of the asset to participate in transactions: quickly, without slippage, without exchange rate deviations and with minimal costs.

What is cryptocurrency liquidity?

Every transaction begins with the meeting of supply and demand. What is liquidity in cryptocurrencies? It is the level of availability of the counterparty at the desired price and at the desired time. The higher the parameter, the faster the transaction and the lower the distortion between the expected price and the actual price. In highly liquid markets, the order window is formed uniformly. Buyers and sellers place limit orders, creating a dense ‘price corridor’. This type of market absorbs large orders without altering the exchange rate.

Difference between liquidity and trading volume

These indicators are often confused. However, the difference is fundamental. Volume shows how many tokens have been moved during a given period, while liquidity shows how quickly and accurately the movement has occurred. An asset with high trading volume can be illiquid if the market reacts to a large order with a price increase.

Calculation mechanics: how to determine liquidity

The formal definition does not reflect the essence. Applied metrics are used for evaluation. You can calculate the liquidity of cryptocurrencies and understand what it is by combining indicators of spread, market depth, weighted average price, and execution speed. One way to do this is to simulate an order for a certain amount and fix the deviation from the market price.

The step-by-step evaluation model includes:

Determining the spread: the difference between the best bid and ask prices (e.g., 0.12% for BTC and 1.6% for PEPE).
Depth of the glass: volume of liquid orders at ±1% of the average price.
Execution speed: time it takes to execute a trade at the market price.
Slippage: price variation from the first to the last partial execution of the order.
Actual volume: total number of completed transactions, not just orders placed.

The comprehensive evaluation shows how the asset behaves under different loads.

Bitcoin liquidity: benchmark among digital assets

BTC has the best liquidity profile among crypto assets. This indicator is formed thanks to its global presence, thousands of trading pairs, the availability of derivatives, and institutional participation. The average spread is less than 0.05%, and transactions of up to 1 million dollars are executed without slippage. On the Binance exchange, the daily trading volume of BTC/USDT exceeds $15 billion. At the same time, the asset maintains its stability even during peak volatility hours. Its high capitalisation ($1.2 trillion) makes Bitcoin the core of inter-exchange trading, including the OTC market.

What is liquidity and how does it affect the price of cryptocurrencies?

The key dependence is reflected in the exchange rate’s reaction to a large-volume order. The influence of liquidity on the price of cryptocurrencies lies in the fact that highly liquid assets maintain exchange rate stability even when there is a sudden increase in volume. Under weak conditions, every large order moves the market.

Take, for example, a token with a capitalisation of $250 million: a $500,000 order can raise the price by 3% to 5% with low liquidity, while in a market with a volume of $10 billion, the same contract would cause a deviation of less than 0.1%.

Factors and dependencies

The cryptocurrency market is characterised by asymmetric liquidity. The parameter depends on many factors: the level of trust, the distribution of volumes among exchanges, the presence of stablecoins in the pair, the number of active traders, and institutional participation.

Key determinants:

Exchange: trading volume, market architecture, market-making policy.
Volume: actual number of trades, not just total requests.
Exchange rate: price stability under demand conditions.
Commissions: low fees stimulate trading activity.
Transactions: processing speed influences the overall market reaction.
Turnover: indicator of long-term stability.

Different exchanges show different levels of liquidity for the same asset.

Analysis tools

Technical indicators do not always provide a direct answer. Therefore, to understand what cryptocurrency liquidity is, it is necessary to conduct a separate analysis. It is necessary to evaluate the trading volume, average spread, glass density, and sensitivity to large orders together.

Practical tools:

Market depth log: visualisation of order density.
Average slippage: change in price after a series of partial executions.
Impact factor: influence of the specified volume on the exchange rate.
Order book charts: difference between buy and sell orders in real time.
Built-in volatility: internal stability of the asset during the session.
Trade aggregation: analysis of volumes by time, speed, and direction.

A comprehensive assessment helps investors avoid the pitfalls of a delicate market and build a strategy on a solid foundation.

Practical relationship: liquidity and trading conditions

Trading activity depends on conditions, specifically liquidity. High liquidity reduces commissions, increases security and eliminates slippage. In this context, what cryptocurrency liquidity is is no longer a theoretical question, but an everyday parameter of working with assets. For example, a token with a high index allows you to form an intraday buying and selling strategy, while one with low liquidity requires waiting and carries price risks.

Platform, asset, order

Understanding what cryptocurrency liquidity is begins with three points: exchange, asset, and order. A liquid exchange offers a dense market, reliable transaction processing, and protection against delays. An asset with a high parameter is traded stably. A correctly placed order is executed without distorting the price.

Any strategy must take into account:

Order type: limit or market.
Position size: comparability with the current order book.
Fees and commissions: their influence on final profitability.
Investor objectives: long-term holding or high-frequency transactions.
Asset capitalisation: the higher it is, the greater the liquidity.

What is cryptocurrency liquidity? The most important thing

Business strategy, asset selection, portfolio structure: understanding cryptocurrency liquidity provides a competitive advantage. Knowledge allows you to avoid mistakes, build stable positions, and respond accurately to changes in the market situation. In a context of accelerating operations and growing participation by institutional players, the importance of liquidity takes on a paramount character. Real trading begins with the calculation of a key indicator, not with forecasts and emotions.

Which cryptocurrency to invest in now: the most important currencies in 2025

The blockchain market has entered a phase of transformation. The growth of TVL indicators, developer activity, record liquidity volumes in protocols, and the arrival of institutional investors have marked the beginning of a bull market. Investors are shifting their focus from hype to sustainability. The decisive factor is no longer noise, but the dynamics of ecosystem development. The current question — which cryptocurrency to invest in now — does not require guesswork, but an analysis of systemic advantages and proven metrics.

BTC: the figure as an asset, the network as capital

The first cryptocurrency in history maintains its leadership in terms of trust, capitalisation, and institutional interest. BTC forms the basis for assessing the state of the entire market. Total capitalisation exceeded $800 billion in early 2025. Growth from $25,000 in 2023 to $42,000 in February 2025 reflected the perception of the asset as digital gold. The 2024 halving reduced the reward to miners to 3.125 BTC, creating a deficit in the face of increased demand.

The Bitcoin network demonstrates high reliability: 99.98% uptime, hash rate above 600 EH/s, which is 10 times more than in 2020. This demonstrates the interest of miners and the strengthening of network security. The average block confirmation time is 10 minutes and the commission size is about £2, despite the load. The Lightning Network allows instant transactions with a commission of less than £0.01, which reinforces micro-payment scenarios.

Fundamental predictability, limited issuance (maximum 21 million), high liquidity, and the absence of a control centre make Bitcoin an essential component for those deciding which cryptocurrency to invest in now with a view to stability and capital protection.

ETH: liquidity of smart contracts

Ethereum functions as a basic environment for creating decentralised applications, automatic protocols and a digital economy. After switching to Proof-of-Stake, the network reduced its energy consumption by 99.5% and accelerated block confirmation to 12 seconds. In early 2025, the asset is trading at £2,300 after recovering from £1,000 in January 2023. This growth reflects the continued interest of developers and users.

The number of active validators exceeded 1.2 million, indicating broad participation in transaction confirmation. The total volume of ETH locked in staking exceeds 25% of circulation. This puts pressure on liquidity and increases the deficit, which means it keeps the price up. Second-level protocols, such as Optimism and Arbitrum, process more than 60% of the ecosystem’s transactions, offloading the main blockchain.

Ethereum supports over 80% of projects in the areas of DeFi, NFT, GameFi, and DAO. The number of contracts with active logic exceeds 3 million. Platforms such as Uniswap, Maker, and Aave operate within the network, each of which is based on ETH. These protocols provide daily liquidity of billions of dollars, creating constant demand for the base currency.

ETH integrates the concept of modular infrastructure: consensus layer, execution layer, scalability layer. This increases the flexibility of updates and reduces dependence on a single solution. In addition, since 2024, a mechanism for burning part of the commission has been in effect, making ETH a deflationary asset. In one year, more than 1.5 million coins were burned, reducing the total supply.

SOL: speed, scale, load

Solana solves the problem of fast and cheap transactional activity. TPS exceeds 60,000 and the transaction fee remains below £0.001. The launch of decentralised applications, games and social networks has increased interest. In December 2023, the asset was worth £19, and in February 2025, it reached £120, representing growth of more than 530%. Its inclusion among the top cryptocurrencies of 2025 came as a result of the huge interest generated by Solana Mobile and the dApp Store.

BNB: the system as market logic

Binance Coin provides interaction with the largest exchange infrastructure. Its application in the commission system, launch pads, staking and DeFi activates constant demand. The repurchase and burning of tokens reduces the total supply. In January 2023, the asset was valued at $260, and in February 2025 it reached $480. The support of BNB Chain reinforces the technical potential. In the context of evaluating which cryptocurrency to invest in now, BNB offers a balance between stability and growth.

AVAX: multichain logic structure

Avalanche offers a unique subnet architecture. The mechanism of creating independent networks reinforces scalability without overloading the main chain. EVM compatibility facilitates the migration of smart contracts. Growing interest in DeFi and GameFi within AVAX increased TVL to $1.2 billion in January 2025. The format is becoming the solution for technology-oriented portfolios.

XRP: speed and institutional vector

XRP focuses on bank transfers and institutional payments. Transaction speed is less than 4 seconds. The transfer cost is 0.0002 dollars. The resolution of legal issues has stabilised the asset. The increase in the number of partnerships in the Asian region has triggered demand. XRP has risen from £0.45 to £1.1 in 12 months. The market perceives it as a stable asset with growth potential in the context of interbank solutions. When considering which cryptocurrency to invest in now, XRP offers an infrastructural approach.

DOT: modular development architecture

Polkadot implements the parachain model. The ability to connect independent networks allows for scalability without overload. At the same time, the protocol itself is updated without hard forks. DOT offers a staking reward of up to 14% per annum. In 2023, the token’s value was £4, and by early 2025, it had risen to £8.4. Developer interest remains very high. DOT is on the list of profitable cryptocurrencies to invest in, focused on architectural flexibility.

ATOM: cross-chain as a philosophy

Cosmos is based on the concept of interconnected blockchains. ATOM is used as a management and staking token. The IBC protocol enables cross-chain transactions without third-party bridges. The growth in the number of networks in the ecosystem and the launch of Gravity DEX have triggered demand. ATOM has gone from £8 to £15 in a year. When asked which cryptocurrency to invest in now, the asset offers technological versatility and a developed infrastructure.

LTC: digital silver and moderate growth

Litecoin remains one of the oldest cryptocurrencies, with minimal fees and high transaction speed. The block frequency is 2.5 minutes. The August 2023 halving reduced issuance, and the asset rose from £65 to £105. Its use in calculations and support for the MWEB protocol ensure stability. LTC remains relevant as part of a balanced portfolio. When considering which cryptocurrency to invest in now, Litecoin offers moderate growth with low volatility.

UNI and ADA: management and adaptability

Uniswap provides most of the liquidity in the decentralised exchange market. Daily volume exceeded £1.3 billion in January 2025. UNI is used in voting and protocol updates. At the same time, the token shows growth from £4.3 to £9.8 in a year. Cardano (ADA) implements PoS with a scientific approach and a slow introduction of updates. New modular components have been activated in this project, and the token has reached a level of £0.76. When compiling the list of promising cryptocurrencies for 2025, both options rank among those that show stable growth and implement innovations.

How to choose which cryptocurrency to invest in now

Each of the assets presented below offers a unique approach and real growth mechanics. A combination of 3 to 5 positions from the list forms a stable portfolio. The question of which cryptocurrency to invest in now does not require betting on the trend, but rather calculating the logic of the system. Reference list:

BTC: capitalisation, institutional interest, limited issuance.
ETH: smart contracts, staking, high liquidity.
SOL: high speed, applications, scalability.
BNB: integration with the exchange, tokenomics, ecosystem.
AVAX: subnets, compatibility, decentralisation.
XRP: transactions, payments, institutional partners.
DOT: parachains, updates, flexibility.
ATOM: cross-chain, staking, ecosystem growth.
LTC: stability, application, halving.
ADA: scientific approach, PoS, implementation of solutions.

Towards sustainability

The cryptocurrency market entered a phase of maturity in 2025. Trends change, but the basis for results lies in systematic selection. Capitalisation, liquidity, technology and team are a set of criteria that determine a long-term investment. Given the growing interest from funds and platforms, the decision on which cryptocurrency to invest in now requires calculation, not emotions. A strategy based on technical analysis and blockchain analysis ensures a balance between protection and profits.

June 2, 2025

Mining and staking: what are they and what are the differences?

For some time now, digital assets are no longer just rare, but have become real tools. Cryptocurrency is no longer exclusively associated with Bitcoin: it is now part of everyday language, investment wallets and government discussions. But not everyone understands where the token comes from, who confirms transactions and why algorithms influence profitability. To do this, we need to understand two fundamental mechanisms of blockchain and their differences: mining and staking. Both methods support the operation of the network, but do so in fundamentally different ways. One requires equipment and energy. The second is tokens and patience.

What is mining: mechanisms of action and role in blockchain

Mining lays the foundation for a decentralised network. An algorithm called Proof of Work (PoW) initiates a competition between computers: the one that finds the solution to a problem the fastest adds a segment to the chain and receives a reward.

The system sets a task: find a number where the hash of the block matches the conditions of the network. The miner starts the calculations and checks billions of options. A computer finds the correct one: the block is validated, transactions are confirmed and the network continues to function.

The process requires:

specialised video cards or ASIC devices;
direct electricity;
cooling;
access to a pool or your node.

The miner not only earns money, but also provides security. The greater the computing power of a network, the more difficult it is to attack it. Proof of work rewards and protects work. Every transaction in BTC or Litecoin goes through this system.

What is staking: principles, application and differences with mining

Staking is based on a different approach: Proof of Stake (PoS). Here, there is no competition for devices. The network selects a validator based on the volume of frozen coins and other parameters. The more tokens are invested, the higher the probability that a block is confirmed.

In simple terms: how staking works

The wallet sends coins to be “frozen”. The network randomly selects a node to validate a block. After validation – reward. If a validator breaks the rules (e.g. validates invalid blocks), its coins are partially or completely burnt.

Expansion systems are typical for:

Ethereum 2.0;
Cardanic;
Peas;
Solana.

Algorithms, validators and resilience

Stake testing creates an economic incentive: honesty produces a profit, cheating produces a loss. Validators manage nodes, monitor updates and check availability. The algorithm increases scalability, reduces energy consumption and speeds up blocking.

Differences between mining and staking: key comparisons

The differences between mining and staking go far beyond the technical implementation. The difference between Proof of Work and Proof of Stake lies in the approach to transaction confirmation, role allocation and economic logic. One method is based on energy and computing power, the other on financial participation and trust in the network.

Differences:

Mining uses the Proof of Work (PoW) algorithm. The essence of this method is to solve a complex mathematical problem using hardware, mainly ASICs or GPUs. In this way, a network participant proves his or her “work” and obtains the right to create a block. Staking works on the basis of the Proof of Stake (PoS) mechanism. The right to validate blocks is granted to those who have frozen a certain number of tokens in the system. Instead of a calculation task, the network is based on the participants’ share of common assets.
The methods have different tools. The miner uses physical equipment whose power is expressed in hashrates. For staking, all you need is a digital wallet with tokens and, if you manage your own node, server software to ensure business continuity. You can participate in the process without infrastructure by delegating funds to the validator.
The financial costs of participating in block validation also vary depending on the approach. Mining, unlike staking, requires continuous investment in electricity, cooling and equipment maintenance. Moreover, as networks become more complex, the technology becomes outdated and obsolete. In staking, the fee is to freeze funds that cannot be spent or sold during the freezing period.
Income is generated in several ways. The miner receives a reward in the form of a fixed reward for the block found and transaction fees. The amount of profit depends on the hashrate, luck and the general state of the network. Staking awards rewards for participation in block confirmation or consensus voting. The amount depends on the number of coins wagered and the protocol policy, including inflation and the amount of commission.
The risks involved in PoW and PoS are also different. Mining is subject to changes in network difficulty, declines in the market value of coins, technical failures and regulatory restrictions. Staking carries the risk of so-called “slashing”: if the validator breaks the rules, a part of the staked funds is burnt. Furthermore, the freezing of tokens reduces the flexibility of asset management, especially in conditions of high market volatility.

The fundamental difference between mining and staking lies not in the verification method, but in the philosophy: one values calculation, the other trust and participation.

How to choose between mining and staking: differences in strategies and conditions

The choice does not depend on technology, but on means, objectives and circumstances. The differences between mining and staking become apparent when we analyse them not in theory, but in the practical context: initial capital, infrastructure, risk appetite and time horizon of profit expectations.

Who is mining for?

A solution for those who are familiar with the equipment, have the technical basics and are willing to assume the recurring costs. Data processing centres, hash rates, private pools: all these systems require maintenance, data processing and legal registration.

Typical portrait of a miner:

has a refrigerated space;
receives preferential or stable electricity (from $0.04/kWh);
has experience with ASIC or GPU hardware;
has an initial budget of between $2,000 and $10,000;
willing to take risks when the exchange rate falls and network complexity increases.

Income is generated by two streams: a fixed remuneration and a variable commission. At the same time, the payback period is directly dependent on cryptocurrency winters, cryptocurrency halving and geopolitical developments.

Who is staking intended for?

A way for those who want to participate in the crypto network without having to buy equipment. The main requirement is the presence of coins. The more tokens you point, the greater your chances of receiving a reward. There are no energy, repair or logistical costs.

Typical strike participant

Possesses Ethereum, Cardano, Solana or similar assets;
chooses between delegating and executing a node;
wishes to receive an income without performing an ongoing activity;
values stability and predictable profitability;
is not afraid to freeze funds (7 to 365 days, depending on the project).

For delegation, 5 to 50 tokens (equivalent to $100-1,000) are often sufficient. In this case, validators take a commission (5-10%) and the tokens remain under the control of the user’s wallet.

Examples of coins: what to mine, what to bet on

The cryptocurrency market offers dozens of suitable tokens, but it is important to distinguish between their purpose and architecture.

Mining – benchmarks:

Bitcoin (BTC) is a classic cryptocurrency based on the SHA-256 algorithm. It requires ASICs.
Litecoin (LTC) is an alternative with a faster block time. Scrypt algorithm.
Kaspa (KAS) – GPU mining, high block rate.
Ergo (ERG) is a power-saving approach specifically for AMD cards.

Stacking managers:

Ethereum 2.0 (ETH) is the largest PoS network. Minimum 32 ETH for a self-hosted node.
Cardano (ADA) – active development of decentralisation and delegation without loss of control.
Solana (SOL) – fast network, high node requirements, but a convenient delegator.
Polkadot (DOT) is a parachain network with high staking performance.

The differences between mining and staking in the context of coins are reflected in the infrastructure: BTC requires an ASIC, ETH requires tokens and a validator and ADA requires a mobile wallet and one-click delegation.

The future of approaches: where the market is heading

Mining remains the backbone of BTC networks, but more and more projects are moving towards staking. The reasons for this are scalability, sustainability and ecology. Proof-of-stake algorithms consume 99% less energy than PoW. Ethereum has already switched to PoS. Other projects focus on the development of hybrid models: proof-of-activity, proof-of-combustion, proof-of-capacity. The market is gradually shifting from physical costs to digital guarantees.

Main vectors:

shift to delegated networks;
development of decentralised hubs;
zk confirmations implemented by speed;
reduce barriers to entry for users.

In the future, the differences between mining and staking will no longer be a question of technology, but of accessibility and trust in the network. He who brings stability attracts participants.

What is the difference between mining and staking: the basics

Both approaches serve the same purpose: maintaining the blockchain. But they do it in different ways. The difference between mining and staking lies in the way the network values participation. The first way is through work. The second is through trust. The investor chooses the approach that suits him best. But in both cases it is about participating in the new economy.

May 12, 2025

What is cryptocurrency liquidity and how is it calculated?