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Empirical analysis of liquidity thresholds for crypto assets

Author

Listed:
  • Hsieh, Sheng-Feng
  • Brennan, Gerard
  • Sannella, Alexander J.

Abstract

This study applies the methodology of the SEC (2018) to empirically determine thresholds for liquidity of crypto assets, utilizing two metrics for assessing liquidity: the Average Daily Volume (ADV) calculated by the number of units of crypto assets traded (ADV#) and by the traded dollar amounts (ADV$). Our findings reveal that the liquidity distribution patterns for both actively and thinly traded National Market System (NMS) stocks, alongside crypto-USD pairs, exhibit comparable trends. Notably, the liquidity threshold distributions remain stable despite the inclusion of crypto assets with very low unit prices; however, the volume of units traded does affect the distribution when ADV$ is used. This research contributes to the accounting field by offering a new approach to determine liquidity benchmarks for crypto assets, potentially guiding the assessment of whether a crypto asset is traded in an active or inactive market for fair value accounting purposes.

Suggested Citation

  • Hsieh, Sheng-Feng & Brennan, Gerard & Sannella, Alexander J., 2024. "Empirical analysis of liquidity thresholds for crypto assets," International Journal of Accounting Information Systems, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:ijoais:v:54:y:2024:i:c:s1467089524000320
    DOI: 10.1016/j.accinf.2024.100699
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    More about this item

    Keywords

    Fair value measurement; Thinly traded; Crypto asset; Inactive market;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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