Investors that trade in penny cryptos have one overriding concern: liquidity. Liquidity is the ease, speed, and price at which an asset can be swapped for other investments. In short, if low-priced crypto isn’t easily tradable, it isn’t beneficial to investors. If a token appreciates 50%, but the owner can’t sell it, it is much less valuable. Conversely, if the same token owner can immediately realize a 50% gain on the said token, it becomes much more relevant.
So, the question then is how investors can judge the liquidity of penny cryptos. There are two ways. One is 24-hour trading volume. The greater the trading volume over time, the more liquid an asset is. The quicker an owner can sell, the better. Two, bid-ask spread. The bid-ask spread is the difference between a buyer’s asking price and a seller’s offer price. Smaller spreads indicate higher liquidity.
With that said, here are three penny cryptos with high liquidity I think speculators may want to consider right now.
Shiba Inu (SHIB)
Shiba Inu (SHIB-USD) is notoriously inexpensive, trading for fractions of a penny. It currently sells for around $0.000010. That isn’t a number we’re used to dealing with, which makes it hard to comprehend what it means. Here’s one way of understanding it: $1.00 is enough to purchase roughly 100,000 Shiba Inu tokens. A penny makes you the proud owner of approximately 1,000 puppy-inspired tokens.
That should make investors curious whether it is indeed liquid or not. To me, the best way of understanding that question is to look at 24-hour trading volume relative to market capitalization. Approximately $190 million worth of SHIB traded hands in the 24 hours before the writing of this article. There is roughly $6.6 billion worth of SHIB circulating in total.
It’s challenging to state that Shiba Inu is highly-liquid objectively, but it seems to be a reasonable argument, given that nearly $200 million of SHIB changes hands daily. This project lacks utility and is almost worthless, but that doesn’t matter, because one speculator can swap it with another and make some money, it has value.
Dogecoin (DOGE-USD) paved the way for copycat meme cryptos. It was the pioneering force in creating a liquid market for insubstantial and highly non-utilitarian assets. It’s also relatively expensive compared to its descendants like Shiba Inu.
For around 8 cents, an investor is entitled to ownership and control over a single Dogecoin. That same small fortune would buy around 8,000 Shiba Inu tokens. In short, Dogecoin is the king of this highly-speculative market.
Dgoecoin is also quite liquid, with more than $550 million worth of DOGE trading hands in the 24 hours before this article was written.
Will it appreciate moving forward? I tend to believe so. Leading financial figures like Jamie Dimon are increasingly predicting a greater likelihood of recession late in 2023. Fear over the state of the financial markets will trigger volatility and spark distrust in our economic system. That paves the way for crypto to gain ground.
Dogecoin isn’t part of any movement that substantially progresses DeFi, to be sure. But it gets lumped in as a leading crypto, creating plenty of opportunity for its price to increase.
Cardano (ADA-USD) fundamentally differs from the other penny cryptocurrencies on this list. Not in terms of liquidity – Cardano trades roughly the same frequency as Dogecoin, and has a similar market cap. It’s one of the leading names in the crypto space and offers liquidity to traders.
However, it remains fundamentally different from SHIB and DOGE in terms of quality. Shiba Inu and Dogecoin were built based on memes of a Shiba Inu dog. It’s a strange phenomenon that is currently being leveraged to exchange value.
Cardano is building innovative blockchain technology in an attempt to advance the field. The project is noted as one of the first to utilize a proof-of-stake consensus mechanism. Other leading crypto projects have followed suit.
And Cardano also adheres to a peer-reviewed research process to iteratively build its blockchain. The company behind this project leverages academic research to inform its development. In time, that approach promises to make Cardano a more viable project long-term because of its evidence-based tenets.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.