Cryptocurrency Liquidity — How to Choose the Best Liquidity Provider?

Cryptocurrency Liquidity — How to Choose the Best Liquidity Provider?

B2Broker logo picture.B2Broker - Constantine Belov
Mar 31, 2023

Today, there are a large number of crypto exchanges that, despite many differences among themselves, offer the same opportunity — profits in the crypto market. In order to ensure an uninterrupted process of asset trading with a minimum level of their volatility, exchanges are in dire need of such an essential component as liquidity, which helps maintain the stability of supply and demand between market participants.

This article will help you understand what crypto liquidity is, what types of liquidity providers exist, as well as what criteria will help you choose a reliable crypto liquidity provider.

Definition of Cryptocurrency Liquidity

Crypto liquidity providers are companies that keep crypto assets in their own accounts and assist brokers and other organizations in providing services to their clients. They are meant to assist cryptocurrency exchanges in solving liquidity problems. An exchange that lacks liquidity usually experiences a liquidity crisis.

Crypto liquidity providers are frequently called market makers because of their similar functionality and working principle, but these are completely different. In the context of crypto liquidity, "market maker" refers to the players responsible for making the market, such as banks, funds, and other institutions, whereas liquidity providers serve as intermediaries between brokers and market makers.

Having a high level of trading activity on the crypto market contributes to liquidity, as evidenced by a wide range of market buy and sell orders and pending orders within the order book. When it comes to providing crypto liquidity, it is prevalent for state authorities to regulate and monitor crypto liquidity providers to ensure that they adhere to international standards, country laws, and other requirements.

Assessing the Different Types of Crypto Liquidity Providers 

Today, the cryptocurrency market has reached incredible heights of development and serves thousands of different companies and millions of retail investors. In order to meet such a great demand for crypto products and trading, there are various organizations that maintain a stable level of liquidity in the crypto market even in times of turmoil, such as an economic crisis.

A. Spot Exchanges 

It is possible for regular cryptocurrency exchanges to serve as cryptocurrency liquidity providers if they have sufficient capital to maintain the essential price levels of crypto assets while preventing strong price fluctuations caused by buying or selling large volumes. Since there are many reliable crypto exchanges today, there is usually no question of where to get enough liquidity to be able to trade comfortably.

B. Over-the-Counter (OTC) Brokers 

In cases when it becomes clear that there is a lack of liquidity in the market, OTC brokers come to the rescue. OTC brokers are extremely experienced crypto market players who help clients to make large transactions. They act as a kind of guarantor in transactions and help to find sellers or buyers for the required crypto asset. This is due to their good market depth, reputation, and rich transaction history.

C. Market Makers 

Instruments with low liquidity are extremely difficult to trade. Therefore, supplying liquidity to the market is the primary function of any market maker. Market makers are typically understood as any large financial institutions, such as big commercial banks, hedge funds, etc., with such large amounts of money that they can directly influence the price of any asset by buying or selling it in large quantities.

D. Institutional Liquidity Providers 

Institutional liquidity providers are commercial organizations that act as the same financial structures as hedge bonds, large banks, consulting and insurance firms that allocate large funds to maintain liquidity, and usually, they have a completely different scale in contrast to the market makers, both in the size of available capital and other indicators that determine the size of the business.

Evaluating a Crypto Liquidity Provider

Very often, as a result of a hasty decision, there are all sorts of inconveniences from working with a liquidity provider. In order to avoid this, we offer you a number of criteria that must be considered in order to make the right choice of the best crypto liquidity provider.

  • Licensing and Regulatory Framework

The field of crypto-trading is characterized by high-security standards and strict requirements imposed on liquidity providers and other crypto organizations to prevent all sorts of fraud and fraudulent actions. For this purpose, there are registration and licensing procedures that all crypto-liquidity providers must pass through without exception. If a provider does not have licensing and registration information, you should consider whether it is worth working with it.

  • Trading Volumes and Markets Offered 

A reliable crypto liquidity provider must provide access to a high level of trading volumes in order to maintain a liquid market. Among other things, the provider must have in its arsenal a wide range of markets with which it is ready to work in order to redistribute liquidity from one market to another when the need arises.

  • Fees and Charges 

The level of commissions and other fees for liquidity services is one of the most important things to consider when choosing a provider. Many liquidity providers offer democratic prices and a flexible tariff system, allowing you to choose the best option that will suit your budget. Also, it is worth remembering that you must carefully study the conditions of transactions to understand the size of the commissions contained in each transaction.

  • Security Measures Implemented 

Security has always played a paramount role in providing reliable access both to financial markets and to the services and products of organizations that operate on them. You should pay special attention to the level of protection offered by the liquidity provider.

  • Platform Features and User Experience 

In order for users to have round-the-clock, convenient, fast and secure access to the market, the liquidity provider must provide an impeccable user experience, which is reflected in a wide range of functions, pleasant design of platform elements, as well as other bonuses that are available on the platform.

  • Support Services Offered 

Support service is one of the key elements of any business. The ability to provide immediate solutions to customers' questions, doubts, and difficulties is the criterion that determines the level of their satisfaction with the service and, as a consequence, the degree of business success. A good provider of cryptocurrency should have a well-coordinated, prompt and high-quality support service.


Liquidity has always played an essential role in maintaining equity in all markets. Of course, there will always be an imbalance between the whales with big money and private investors without influence on the market. Still, liquidity providers offer a lot of assistance to brokers and exchanges, providing a 24/7 source of funds to maintain asset price stability.




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