Market Liquidity of Cryptocurrency

Qishi Club's 2nd Quantitative Research Project

By Runmin Zhang

May 19, 2019

Introduction - Cryptocurrency: ▼



Global Nodes of Bitcon Network

Introduction - Cryptocurrency as Virtual Commodities: ▼

"..Virtual currencies have been determined to be commodities under the Commodity Exchange Act.." - US Commodity Futures Trading Commission

> Digital Gold

Many trading opportunities

> More Exchanges

> Public Accessibility

> Simple API

Many trading opportunities

> Thin-Trading

> Poor Quality & Transparency

> High Latency

Bitfinex - Techer Scandal

Sinusoidal Volume in OKex.

Introduction - Roadmap: ▼

How can we Interpret/design indicators from possible manipulated data?

Lquidity: a vital element in markets.

Market Liquidity - What is market liquidity?

Liquidity - ability to smoothly absorb the flow of buying and selling orders.

> Tightness: Buy and sell with low transaction costs.

> Depth: The existence of abundant orders.

> Resiliency: The ability of correct imbalances.

Loose definitions!

Market Liquidity - Liquidity Metrics

Market Liquidity - Market Impacts

Orders will impace markets.

We can decompose market impacts into several componets:▼

Temporary Impact

> When we take liquidity, equity price is impacted due to distorted demand/supply equilibrium.

> Temporary impacts dissipates over time.

Permanent Impact

> Market makers infer institutional traders intention.

> Permanent impacts would be reflected in equity prices.

Model Market Impacts

Naive definition:

Implementation and Analysis - Data Collection:▼

Collect Data by CCXT - github:ccxt/ccxt



A small dashboard

Trade Data:

Depth Data:

Implementation and Analysis - Possible Market Manipulations

Market Impacts:

Future Work


> All calculations involve market data.

> Can we trust market data published by exchange?

We still have a lot to do...


[1] Parlour, Christine A., and Duane J. Seppi. "Limit order markets: A survey." Handbook of financial intermediation and banking 5 (2008): 63-95.

[2] Sarr, Abdourahmane, and Tonny Lybek. Measuring liquidity in financial markets. Vol. 2. International Monetary Fund, 2002

[3] Von Wyss, Rico. Measuring and predicting liquidity in the stock market. Diss. Verlag nicht ermittelbar, 2004.

[4] Dong, K. (2015). Liquidity prediction in limit order book markets (Doctoral dissertation, University of Liverpool).

[5] Burghardt, Galen, Jerry Hanweck, and Lauren Lei. "Measuring market impact and liquidity." The Journal of Trading 1.4 (2006): 70-84.

[6] Andrew Ferraris. Equity Market Impact Models. Mathematics at the interface between business and research, Stifterverband fur die Deutsche Wissenschaft.

Thank you !