Cryptocurrency liquidity is king?

Cryptocurrency analyst Willy Woo https://twitter.com/woonomic believes that few tokens are a good investment because CoinMarketCap data shows that of the 4987 tokens listed, only the top 40 are liquid.

Less than 1% of all tokens listed on Coinmarketcap are liquid.

Although considered a safe-haven asset, it is known that cryptocurrencies are easy to manipulate. The overall lack of liquidity in the market gives a few giant whales holding a large number of tokens power, which can cause the price of even the most stable cryptocurrency to fluctuate at any time.

The inability to quickly buy and sell assets in the market is one of the biggest reasons for the stagnation of interest in this industry. Since experienced investors are looking for a "fast in and fast out" solution, the All-in cryptocurrency is not a viable option.

That's what Willy Woo, a famous cryptocurrency analyst and partner at Adaptive Capital thinks. Woo shared a tweet on November 13th, noting that of the 4978 tokens currently listed on CoinMarketCap, only the top 40 are liquid.

He shared a chart that lists the top 50 cryptocurrencies by "transaction volume", of which only the top 39 are listed on the exchange and are liquid. This means that only 0.81% of all cryptocurrencies listed on Coinmarketcap provide liquidity.

"Investors want liquidity when they enter the market and liquidity when they exit. Few tokens have enough liquidity to be a good investment," he wrote.

Not everyone is looking for asset allocation.

Woo explained in subsequent tweets that there are two types of investment: asset allocation and technology investment. Those who want to allocate some of their assets to invest in cryptocurrencies will avoid illiquid tokens and invest their funds in high-value cryptocurrencies such as Bitcoin.

Those who want to invest in early-stage high-tech companies choose higher risk, Woo said, with only a 5% chance of recovering such an investment. According to him, Bitcoin is the cryptocurrency of choice for entering the industry, and the rest is "a bet on startups."

However, what Woo is saying is not universally accepted by the crypto community. ShapeShift CEO Erik Voorhees said such comparisons are not fair because most of the projects he lists are less than three years old.

Others have pointed out that the trading volume of the top three tokens (USDT, BTC and ETH) on the Woo chart may be distorted, as these three tokens are considered anchor targets for other cryptocurrency transactions.

Some people say that liquidity itself should not be a determining factor in whether people invest in cryptocurrency projects.