1/ Spent some time looking at crypto exchange trading volumes last night.
Here are some gems highlighting the actual liquidity in the $12b of reported 24h volume.
coinmarketcap.com/currencies/vol…
Here are some gems highlighting the actual liquidity in the $12b of reported 24h volume.
coinmarketcap.com/currencies/vol…
2/ BTC leads the crypto market in both total valuation & liquidity. 31% of the daily volume was BTC trading. 
3/ The leading exchanges & pairs are however perhaps not as friendly looking as an institution or regulator might hope. 4 of the top 10 pairs were with USDT (Tether), the #3 was Dash on ZB, & many of the top 10 exchanges are not well known (or are seen as ?able).
4/ Tether (USDT) comes in at #2 for daily trading volume (19%). Tether’s USD reserves (& the $’s trail) have been ?ed for years. Many exchanges hold USDT & are closely related to Tether. (see coindesk.com/tether-review-…)
5/ Ether at #3 has only 1 fiat pair in the top 10 (USD on Bitfinex). 5 of the top 10 are USDT though.
6/ When we get to Dash at #8 we start to see some bad centralization. >70% of Dash trading volume is on ZB between their USDT & BTC pairs.
7/ In addition to Dash, 2 of the other most popular ‘privacy coins’ ZEC & XMR also have bad exchange volume concentration. >50% of ZEC volume & >90% of XMR volume is with KRW on Bithumb.
8/ Scrolling down, #15 CK USD is traded entirely on 2 exchanges, #16 DMarket is >90% Upbit volume, #17 Bytom is 82% Bibox, #18 OmiseGo is 57% KRW on Bithumb, & there are countless more similar examples.
9/ Other popular ‘money coins’ that have seen bullish remarks from institutional investors include Decred & ZCoin. Each has <$5m 24h volume & <$1m on any 1 market, making trading a significant position efficiently near impossible. (trading >10% of 24h volume quickly is not fun)
10/ Thankfully an OTC mkt exists for crypto. Estimates say OTC is up to ~3x as large as spot mkt. The derivatives mkt is growing as well & custody options are maturing. Many of these names & practices are more friendly to institutions & regulators. (see coindesk.com/heres-the-bitc…)
11/ These options are however maybe not more friendly to the 'core ethos' of crypto & even retail traders w/ accreditation reqs, trade mins, etc.
12/ Many OTC desks do not offer trading for as many assets as the leading exchanges. Similarly, the assets underlying existing & future structured products & derivatives are & will be limited to the most secure & liquid assets.
13/ DEXs are meant to provide additional liquidity options for traders. Adding a new ERC20 token to an ETH DEX should be much easier than passing it through Coinbase’s internal approval gauntlet.
14/ Unfortunately, DEX volumes are still quite small (the leading ETH DEX did ~$4m in trading in the last week). Local p2p trading options are in a similar situation.
15/ Many large early stage deal (SAFTs/ICOs) investors now have limited (if not no) liquidity. (see )
16/ In addition to frequently underperforming liquid crypto alternatives (especially in more recent times). (see last link + )
17/ Many SAFTs/ICOs & the resulting tokens also face having any current liquidity taken away as the result of regulatory action towards the token being deemed a security or the sale being deemed an illegal securities offering. (see The DAO, recent exchange delistings)
18/ Thus, many altcoins and early stage token deals have (1) limited OTC & exchange liquidity, (2) risk of illegal securities regulation, (3) tokens that don’t really make sense (see )
19/ Unfortunately to some crypto funds & investors bearish on the hundreds of dapps & dapp platforms, short / borrow markets are still similarly very limited & illiquid.
20/ Thus, big crypto funds ($100m+) may have issues w/ (1) trading alts, derivs, & shorts in substantial positions, (2) de-risking illegal security exposure, (3) de-risking long exposure in bear mkts, & (4) maintaining & acting upon portfolio liquidity (if desired, see HF vs VC)
21/ The problem will be dramatically heightened or reduced based on the fund or investor’s mandate. If there are restrictions on the % allocation to any 1 asset, a fund may need to deploy $100ms into assets beyond the low # of quality liquid assets & early stage deals.
22/ Rather than Galaxy’s 30% 1 asset cap or Coinbase’s market cap weighted indices, I think an investor or user should be able to choose their own weights, omitting assets or allocating more heavily to assets they’re most bullish on.
23/ Liquidity in crypto is like a mine field, many tokens have ?able functionality, many ICOs have ?able legality, many exchanges have ?able practices, & most #s in general are very ?able.
24/ I think any sort of automated, passive, or diversified investment strategy at this point in crypto is just very suboptimal.
25/ I think institutions & regulators will look at platforms owned / operated by traditional institutions like ICE/NYSE favorably, & the most secure, liquid, & regulatorily friendly asset (currently BTC) will lead the charge in propelling the asset class into the next bull market
