Investor compares ETH/USD liquidity on centralized and decentralized exchanges

Investor Andrew Kang compared the liquidity of the ETH/USD pair on several centralized and decentralized (DEX) exchanges. He assessed the amount of liquidity required to move the price by 2%. According to his calculations, many DEXs already rival their centralized counterparts.

Chart: +2% Depth of most liquid ETH/USD market of each exchange

DEXs are now clearly starting to give CEXs a run for their money@1inchExchange even has deeper ETH liquidity than multiple Tier 1 & 2 exchanges pic.twitter.com/ERcsLdmVOv

— Andrew Kang (@Rewkang) August 20, 2020

The deepest market depth for the ETH/USD pair, according to Kang’s calculations, is on Bitfinex. In sixth place, between Kraken and OKEx, sits the decentralized 1inch. Note that 1inch is a DEX aggregator and accounts for the combined liquidity of such platforms.

Yes it’s an aggregator so it’s essentially measuring the aggregated depth of all DEXs it plugs into

— Andrew Kang (@Rewkang) August 21, 2020

Commenters immediately noted the absence of fiat pairs on the mentioned DEXs. The investor was likely comparing ETH/USDT or ETH/USDC pairs, which is indirectly corroborated in the following tweets.

Interestingly, there doesn’t seem to be a very tight correlation between depth and volume.

Looked at Ratios of Depth:Volume here.

OkEx and Binance generate a lot more volume than their depth levels imply.

DEXs around the middle, but still have high variance pic.twitter.com/Ounankkk0S

— Andrew Kang (@Rewkang) August 20, 2020

According to Kang, Uniswap substantially outstrips many centralized exchanges with greater market depth in terms of daily trading volume. Binance remains the leader on this metric.

Market depth and daily trading volume do not exhibit a strong correlation, he concluded.

Earlier, the 1inch team presented their own automated market maker (AMM) algorithm called Mooniswap and raised $2.8 million in a funding round with participation from Binance Labs.

In late July, Uniswap by daily trading volume surpassed Gemini, Poloniex and Binance US combined. In the same month it raised $11 million in investments.

In August, an anonymous investor bought more than 40,000 ETH on Uniswap. As a result of his actions, the cryptocurrency’s price on the platform jumped by 13%, causing him to overpay by nearly $2 million. The total value of the deal across a series of swaps amounted to $17.9 million. Analysts at the time highly praised Uniswap’s liquidity.

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