The maximum score is 10 points, and the minimum score is 1 point. Higher score means higher liquidity, which is good for an asset. The score is calculated based on 3 variables:
listing prevalence
handy liquidity (in BTC)
turnover frequency (for 24h)
Variable | Score distribution |
Listing prevalence | - 0 points <=0.15 - 1 points 0.15-0.3 - 2 points 0.3-0.6 - 3 points >0.6 |
Handy liquidity (in BTC) | - 0 points - 0-10 BTC - 1 point - 10-100 BTC - 2 points - 100-500 BTC - 3 points - >500 BTC |
Turnover frequency (for 24h) | - 0 points - 0-10,000 - 1 points - 10,000-50,000 - 2 point - 50,000-100,000 - 3 points - >100,000 |
See the empirical research here.
Metrics | Description | Meaning |
Bid-ask spread, % | The %-difference between best offer and best bid | More liquid assets have lower bid-ask spreads |
10 BTC liquidity | The ratio of best bid-ask spread by 10 BTC (or equivalent) to the best bid-ask spread | Lower ratio means higher liquidity |
Handy liquidity | The cumulative volume in an order book at levels remote from the naive mid market price by 0.5% or less | More liquid assets have higher handy liquidity |
Volume to marcap ratio | The ratio of a daily trading volume (total by all symbols) to the market capitalisation of an asset | More liquid assets have higher ratio |
Number of trades | Number of trades within the latest period | More liquid assets tend to have greater number of trades |
Listing prevalence | The function of the number of exchanges where an asset is listed | More liquid assets are listed at a greater number of exchanges |
The formulas of the selected metrics are shown below.
Bid-ask spread:
10 BTC liquidity:
where:
BAS is a bid-ask spread based on best bid and ask
BAS(X) is a bid-ask spread by X units of base currency
X is 10 BTC or equivalent
Listing prevalence:
where:
erf is the error function
n is the number of exchanges where an asset is listed
N = 20