With cryptocurrency exchanges being the major force that drives the maximum growth and volume in the cryptosphere, every new aspiring entrepreneur wants to create his/her own cryptocurrency exchange software. The demand and competition at this point are pretty intense. If you are aspiring to launch your own exchange as well, it is really important for you to know the important elements to be mandatorily present in your exchange. And the most important one from them is liquidity. Here, in this blog, we are going to discuss the role of liquidity providers and how to choose the right liquidity provider for your exchange. But before going into that, if you are a beginner, let’s take a quick peek at what liquidity is and why it is important for your exchange.
The concept of liquidity
Liquidity refers to the degree of ease in which an asset is exchanged or converted into cash. In simple terms, liquidity decides the ability to buy/sell and convert cryptocurrencies as quickly as possible when the market conditions are favorable. This is why liquidity is the most crucial element of a cryptocurrency exchange software and has the potential to influence the trade volumes and success of an exchange platform. Investors analyze for an exchange with an order book that is full, before investing. A full order book means enhanced liquidity, therefore you need to make sure to boost your liquidity to attract potential investors towards your exchange.
There are different ways to induce liquidity into a cryptocurrency exchange such as,
- Creating artificial accounts within your exchange and stimulating trading activities between them which will increase your liquidity.
- Connecting your exchange API with a third-party exchange with high volume liquidity.
- Joining a network of exchanges whose liquidities are tied together.
These are some of the common methods of enhancing liquidity for your exchange. But the easiest and the most effective way to do it is to associate with the right liquidity providers who will take care of bringing in maximum liquidity to enable a smooth business experience for both the users and the exchange owner. As liquidity is considered the most important factor, and it involves a lot of time, energy, and resources to induce liquidity into an exchange, going with liquidity providers is the ideal choice.
But as discussed earlier, the demand and competition is heavy, which is why a multitude of companies have started offering cryptocurrency exchange solutions and liquidity solutions for entrepreneurs. It is understandable if you are overwhelmed with choosing the right liquidity providers for your exchange. Therefore, let’s take a brief look at a few factors that will help you choose the right team for implementing liquidity into your cryptocurrency exchange software.
How to choose the finest liquidity providers for your exchange?
The first and foremost factor to analyze is the reliability of your liquidity providers. Even though cryptocurrency exchanges are widely popular today, some entrepreneurs and investors are still skeptical about investing money in it due to the constant hack threats and other security issues revolving around them. Therefore, it is very important that you thoroughly analyze how reliable they are before handing over your liquidity integration to them, to avoid safety concerns.
The digital industry, as we know, is constantly evolving and transforming into new forms. Thus, your liquidity providers must be up-to-date with the changing market trends and keep you updated as well. They need to constantly analyze new methodologies or trends to implement for your exchange liquidity, and be available and responsive to you anytime for any queries or clarifications.
It is important that you carefully analyze the instruments used by your liquidity providers and verify if the pricing is valid and authentic accordingly. You also need to verify if the instruments and technology integrations are outsourced, or if the liquidity providers offer their own patented technologies.
Transparency to the users
You need to ensure that your liquidity provider is completely transparent with you. You should be informed about every activity, and every step of the process. Also, they should ensure that the exchange reflects different prices and different tools for users to compare and make an informed decision.
Your liquidity providers must comprise extensive reporting tools such as,
- Profitability Report
- Email Notifications
- Statement of exchange points
- Tick History
- Report on opened and closed transactions according to the requested time span.
Your liquidity providers should possess the ability to complete the tasks as efficiently as possible. Even though there is a possibility for deviations at certain times, every exchange owner should be provided with an automated trading server by the liquidity provider to verify transactions.
These are some of the crucial factors you need to consider before choosing your liquidity provider. Before going through the above-mentioned factors, the key step to identify the best liquidity provider is to undergo market analysis and extensive research on aspects such as previous successful projects, experience, and technical knowledge, customer reviews, reputation, etc., and choose the best company for achieving enhanced liquidity that will enable smooth, seamless transactions for your users.
As a dedicated cryptocurrency exchange development company, at CES, we have employed the industry best liquidity providers who will ensure industry best practices for boosting the liquidity of your exchange. We are one of the earliest to adopt cryptocurrency exchange platform development,and we possess a broad team with unmatched experience and knowledge in the field who will offer high-quality liquidity solutions for your exchange.
Our crypto exchange solutions include every advanced feature that will not only ensure maximum liquidity but take your exchange business to the next phase such as,
- Multi-Asset Engine Integration
- Smooth execution of transactions with high frequency
- Fiat currency transactions
- Price Markups
- Effective risk management tools and strategies
Our expertise ensures reliable, stable, and sustainable solutions and a wide-reach for your exchange among potential global customers. We ensure maximum liquidity, and maximum liquidity means maximum trade volume and profitability. Reach out to our experts to know more about liquidity for your crypto exchange.