Executing trades in popular meme coins has become more convenient due to a surge in liquidity, as indicated by a 1% market depth, reaching all-time highs. This increase in liquidity means that there is a greater ease in carrying out transactions and maintaining stable prices for these tokens.
However, despite the rise in liquidity, there are still concerns about elevated bid-ask spreads, which suggest that meme coins are perceived as relatively risky assets. The bid-ask spread refers to the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a particular asset. In the case of meme coins, the bid-ask spreads remain above 2 basis points on most centralized exchanges, indicating ongoing volatility and risk associated with these tokens.
Kaiko, the Paris-based data tracking firm, reported that the combined liquidity for meme coins such as DOGE, SHIB, and others has reached $128 million. This liquidity level reflects the total value of buy and sell orders within a 1% range of the current market price. The higher the liquidity, the easier it is to execute large orders without significantly impacting the market price.
Despite the concerns about bid-ask spreads, Kaiko noted that many small-cap meme tokens like WIF, MEME, and BOME have experienced substantial growth in liquidity, ranging from 200% to 4000% in their native units. This increase in liquidity could be attributed to price appreciations and the participation of more market makers willing to provide liquidity for these tokens.
While the surge in liquidity is a positive development for traders looking to invest in meme coins, it is essential to remain cautious due to the inherent risks associated with these assets. The high volatility of meme coins can lead to sudden price swings and potential losses for investors. Therefore, it is crucial to conduct thorough research and analysis before engaging in trading activities involving meme coins.
In conclusion, the increase in liquidity for meme coins signifies a growing interest in these digital assets, but the persisting concerns about bid-ask spreads highlight the ongoing volatility and risk factors associated with these tokens. Traders and investors should approach meme coin trading with caution and stay informed about market trends and developments to make well-informed decisions.