Memecoin liquidity reaches new all-time high

Executing memecoin trades is easier than ever thanks to record increases in liquidity, measured by 1% market depth, according to data tracked by Paris-based firm Kaiko.

This milestone represents a significant advance for the cryptocurrency market, especially for tokens known for their high volatility. Furthermore, they highlight that memecoins are no longer just a “joke” and have become an important part of the crypto market.

Recently, the combined liquidity of memecoins such as DOGE, SHIB, PEPE, WIF, BONK, GROK, BABYDOGE, FLOKI, MEME, HarryPotterObamaSonic10Inu and HarryPotterObamaSonic reached $128 million.

This number describes the total value of buy and sell orders within a 1% range of the current market price. The greater the liquidity, the easier it is to execute large orders at stable prices.

Memecoin liquidity

However, liquidity can be even greater. After all, Kaiko did not track the thousands of memecoins launched on DEXs daily as observed on the Dexscreener portal, which maps launches on layer 1 and 2 networks.

Greater liquidity generally leads to a reduction in the spread between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. This parameter is called bid-ask spread.

Tighter spreads ensure better trading prices and reduce the cost of executing trades. However, according to Kaiko, memecoins are not responding as expected. This is because bid-ask spreads remain above 2 basis points on most centralized exchanges.

Kaiko suggests that although more market makers are venturing into providing liquidity for these tokens, they are still risky due to high volatility.

Part of this increase in liquidity is related to price appreciation. However, many small tokens such as Dogwifhat (WIF), Memecoin (MEME) and Book of Meme (BOME) have seen significant growth in liquidity in native units, ranging from 200% to 4000%, as indicated by Kaiko in your weekly newsletter.

Increased liquidity is a positive indicator for the memecoin market as it facilitates more efficient trading and reduces price volatility. However, the persistence of high bid-ask spreads suggests that these assets still face challenges in terms of acceptance and stability.