Kristen Mierzwa
- The FTSE Digi50 Index highlights that digital assets like Bitcoin and Ethereum exhibit liquidity levels exceeding many small-cap stocks.
- Crypto's 24/7 trading structure and diverse exchanges provide continuous liquidity, compared to the fixed trading hours of traditional equity markets.
- Institutional adoption could further boost crypto liquidity, with current levels already driven significantly by retail investors.
“Crypto isn’t liquid.” We beg to differ—this belief doesn’t reflect the reality of today’s digital asset market. While regulatory restrictions and custodial capabilities pose sizeable hurdles for broad-based digital asset products, liquidity is a (much) smaller concern. In fact, investors who think only Bitcoin and Ethereum are tradable at institutional levels might be surprised by the extent of liquidity in the digital asset marketplace.
Here we explore how liquidity in the evolving cryptocurrency market compares to the traditional US equity market.
Crypto liquidity boosted by continuous trading, dozens of centralised exchanges
The market structure for crypto is 24/7, which allows for continuous trading, whereas the US equity market is open during US trading hours. In both markets, advance trading infrastructure allows participants to adjust exposures around the clock via globally listed futures, options, perpetuals, and electronic communication networks.
Another noteworthy nuance in market infrastructure: Crypto assets trade on major centralised exchanges, decentralised exchanges, and over the counter via wallet-to-wallet transactions. At FTSE Russell, we consolidate volume from 43 centralised exchanges for the 400 assets we cover in our FTSE Digital Asset Universe.
US equities largely trade on the biggest US stock exchanges; however, there are dozens of exchanges that serve niche markets and many pools in which investors can source liquidity.
Greater institutional interest could bring additional liquidity
Even with the success of Bitcoin and Ethereum ETFs, we have not seen the same institutional adoption of the crypto market as we have with other traditional asset classes. As such, it’s important to keep in mind that the liquidity we see today in crypto is primarily driven by retail investors—and less than what it could be if we see global institutional adoption of crypto.
Comparing liquidity of the FTSE Digi50 Index and the Russell 1000, 2000 Indices
We recently launched the FTSE Digi50 Index, which measures the performance of the top 50 digital assets by circulating weight, providing exposure to the digital asset market via liquid, globally recognised crypto assets. Below we compare the liquidity of the FTSE Digi50 Index to the US large cap Russell 1000 Index and the US small cap Russell 2000 Index for the month of October 2024. Please note these are pre-election results.
Data can be unreliable in digital assets, and liquidity data can include what are believed to be fake transactions. At FTSE Russell, we have put quantitative and qualitative measures in place to verify the asset and exchange data we use for our benchmarks and indices. Our calculation agent, Digital Asset Research, assesses the quality of market pricing data, qualifies pricing sources and vets more than 400 centralised exchanges.
For the purpose of this article, we have only used volume data from FTSE Russell Digital Asset Participating and Watchlist Exchanges. We have analysed the FTSE Digi50 Index constituents, whose assets have also been vetted through the methodology described above. The data is intended to represent executed transactions between real economic buyers and sellers. The liquidity data provided does not include wallet-to-wallet transactions or those from decentralised exchanges. The digital asset volume data amalgamates trades conducted in fiat currency directly, those conducted in digital dollar tokens like Tether and Circle, and those conducted in other cryptocurrencies.
Russell 2000 Index 1-Month ADTV (USDm) |
Russell 1000 Index 1-Month ADTV (USDm) |
Russell Top 50 Megacap Index 1-Month ADTV (USDm) |
FTSE Digi50 Index 1-Month ADTV (USDm) |
|
|---|---|---|---|---|
| Most Liquid Name | $740.93 | $32,718.03 | $32,718.03 | $9,934.44 |
| Least Liquid Name | $0.01 | $0.51 | $585.45 | $2.72 |
| 25th Percentile | $1.73 | $58.22 | $859.11 | $9.46 |
| 50th Percentile | $6.14 | $119.92 | $1,099.31 | $19.40 |
| 75th Percentile | $17.74 | $257.53 | $1,792.58 | $61.05 |
| Total Count | 1969 | 1009 | 51 | 50 |
Key observations:
- Marathon was the most liquid name in the Russell 2000 Index per one month, end of October average daily trading volume of $740 million. Marathon is a US-based digital asset technology company specialising in Bitcoin mining and cryptocurrency infrastructure.
- There were 405 names in the Russell 2000 Index that traded less than the least liquid name in the FTSE Digi50 Index.
- Half of the names in the FTSE Digi50 Index traded at least $10 million daily, which was more than half the names in the Russell 2000.
- Three names in the FTSE Digi50 Index traded more than $1 billion daily: Bitcoin, Ethereum, and Solana.
While our analysis shows the FTSE Digi50 Index was more liquid than US small-cap stocks during the month of observation, the overall crypto market—which is comprised of thousands of assets—is still less liquid than equities overall. Institutional interest, 24/7 accessibility, and increased market infrastructure could narrow the liquidity gap, though challenges remain, especially around regulation and market fragmentation.
FTSE Russell brought asset and exchange vetted pricing to market in 2021, followed by our flagship market cap index series in 2022. Our modular approach enables us to build customisable digital asset indices for regional regulatory and tradability needs.
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