Liquidity Aggregation vs Prime of Prime: What is the best for Crypto Exchange Business?

Liquidity Aggregation vs Prime of Prime: What is the best for Crypto Exchange Business?

Soft-FX Liquidity Aggregator solution for collection of forex, crypto, stocks, commodities and indices liquidity, matching and execution of clients' trading orders and effective risk-management

Liquidity is an indispensable factor in finance, and good liquidity can automatically build trust among traders within the market. Liquidity is the measure of how quickly and easily an asset can be converted into another asset without having a significant effect on the stability of the spot price. Liquidity increases the stability of a crypto exchange and prevents traders as well as cryptocurrency exchanges from market fluctuation. You have the fair-price factor, where good liquidity ensures fair and equal price for market participants. High liquidity is also the sign of a large number of traders so that the buy order and the sell order will fill out faster than in a low liquidity environment. The more data you have, the better the accuracy when it comes to prediction, as liquidity gives a huge volume of data for precise calculation. This essentially means that the more liquidity your exchange has, the more overall income your crypto exchange will end up having as a result, as more transactions will occur and generate fees.

Primer of Prime

Within the cryptocurrency industry, Prime of Prime is a company that offers to brokers and exchanges a trading liquidity pool, which is selected based on top-rated exchanges. A client can take advantage of the huge liquidity that is being offered by the Prime of Prime aggregated feed. Pros: ● Top-Rated Exchanges Liquidity Pool Trading ● Obtain Prices Only From Prime Brokers Cons: ● Increase in Trade Costs ● Only Pulls in Liquidity From External Sources

Liquidity Aggregation

On the other end of the spectrum, we have liquidity aggregation, which is essentially this process of combining offers to buy or sell an asset from different sources while directing them to executors. This is intended to enable traders the ability to buy and sell assets as close to market prices as possible. Cryptocurrencies are known for being volatile, and as such, the price of the same asset throughout different platforms can actually vary. If a trader is not satisfied with the price of orders to buy specific crypto on an exchange, they’ll have two choices, to accept the price as it is or switch to a different exchange. Furthermore, there are solutions such as the TickTrader Liquidity Aggregator that is designed to help you connect as well as collect the best liquidity from an unlimited number of providers. Pros: ● Pulls the Best Prices From Across the Entire Landscape ● Offers a High Level of Flexibility ● Intelligent and Fair Cons: ● Technical Risks

Why Liquidity Aggregation is Better than Prime of Prime

One of the main advantages an exchange can have is to implement multiple providers of liquidity and aggregating them into a single account. Liquidity aggregators can even unit an unlimited amount of liquidity providers, and this, in turn, allows traders to get the best deal on the market at any time, which is not a possibility in the Prime of Prime model. If you currently own a cryptocurrency exchange or are planning on building one, liquidity aggregation is a go-to due to the fact that it can improve your performance, efficiency, and allow for a higher level of trust from your eventual users. This is due to the fact that, without a liquidity provider, you cannot really benefit from multiple providers, and you will need to provide your users with the highest level of liquidity, which is an impossibility when using Prime of Prime liquidity.

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