Part 2: Liquidity

What does that mean and why does it matter? Crypto currency daily trade volumes amount to approximately 17 billion and are tiny compared to the Fiat Forex markets that trade over 5 trillion across the same time span. For every asset that is bought or sold, regardless if its crypto or other, it needs to have someone to sell to or buy from. The more people buying and selling, the more liquid an exchange is considered (Binance being one of the biggest exchanges, makes it one of the most liquid). With more liquidity comes lower spreads (difference in price) between the buyers and sellers and less slippage (cost of buying/selling into the order book or buyers and sellers). Every time a new exchange opens, it must populate all its trading pairs with buyers and sellers, this further distributes the trading liquidity from existing exchanges, causing bigger spreads and more slippage.

Swyftx has begun solving this problem by using smart order routing to distribute buys and sells across a range of top 100 crypto currency exchanges, starting with the most liquid first. Swyftx’s combined order book liquidity has the potential to be more than 10 times that of Binance. Every time a trade is made on Swyftx, the platform looks to see where the most liquidity exists for that asset and then splits the order across those exchanges to ensure the best market rate, lowest spreads and minimal slippage. Its important to realise that although brokers do charge a higher fee for being the “middle man” in facilitating trades, there is a lot more to consider than just the trade fee. Depending on how much you’re trading, you’ll likely be better off even with the slightly higher fees, saving on slippage and spreads (incredibly important for managing risk).

In Part 3 we’ll look at how brokers are able to bring all your exchanges into one for convenience and better trading opportunities.

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Intro

Intro

Why crypto brokers (Swyftx) can be better than exchanges? In this 4 part series we address several aspects of exchanges and brokers to see why crypto brokers can be better than exchanges if done right! It is especially noticeable in the Australian crypto community...

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