Meme Coin Liquidity Hits Record High Even as Bid-Ask Spread Spotlights Risk

Generally, increased liquidity leads to a tighter bid-ask spread, but that's not the case with meme coins.

Despite Surging Liquidity, Meme Coins Continue to Exhibit High Bid-Ask Spreads

While liquidity is typically associated with tighter bid-ask spreads, this trend does not apply to meme coins, according to data from Kaiko.

Despite surging liquidity, as measured by 1% market depth, meme coins continue to exhibit bid-ask spreads above 2 basis points on most centralized exchanges.

According to data汇总 by Paris-based Kaiko, liquidity for prominent meme coins, including DOGE, SHIB, PEPE, WIF, BONK, GROK, BABYDOGE, FLOKI, MEME, HarryPotterObamaSonic10Inu and HarryPotterObamaSonic, recently surged to $128 million. This figure represents the total value of buy and sell orders within a 1% range of the current market price. Higher liquidity, indicated by a larger dollar amount, facilitates the execution of large orders at stable prices.

However, Kaiko notes that this increase in liquidity has not led to tighter bid-ask spreads, which typically indicate better trading prices and lower execution costs.

"This suggests that while more market makers are venturing into providing liquidity for these tokens, they are still considered risky due to their high volatility," Kaiko stated.

In its weekly newsletter, Kaiko also highlighted a separate trend among small-cap meme tokens. While a portion of the liquidity increase can be attributed to rising prices, several tokens have experienced substantial growth in liquidity in native units.

"For example, Dogwifhat (WIF), Memecoin (MEME), Book of Meme (BOME) saw 200% to 4000% growth in liquidity, respectively," the newsletter reads.