Fragmented Liquidity & Crypto Price Discovery Explained
In traditional markets, investors typically view one universally accepted market price of a security at a point in time. However, in cryptocurrency markets, it is uncommon to witness this condition. Bitcoin, Ethereum, or even any other popular cryptocurrency may display minutely different market prices on more than one exchange at the same time. This is not necessarily a problem of technology but is perhaps a result of the unorganized market structure of the exchanges.
Fragmented liquidity means that the activities of the cryptocurrency market are now spread out across hundreds of independent trading sites. Being a marketplace where cryptocurrency is sold, these sites are important because price discovery is highly dependent on where the…
