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Cryptocurrency Exchanges and Traditional Markets: A Multi-algorithm Liquidity Comparison Using Multi-criteria Decision Analysis

Author

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  • Bhaskar Tripathi

    (Thapar Institute of Engineering and Technology)

  • Rakesh Kumar Sharma

    (Thapar Institute of Engineering and Technology)

Abstract

This paper investigates whether cryptocurrency exchanges exhibit greater liquidity than traditional financial markets. Utilizing four different liquidity measures, we evaluate the liquidity of six leading cryptocurrency exchanges and nine traditional small-cap stock indices across diverse geographies and rank the markets according to their liquidities. We investigate the Pre-Pandemic, First and Second-wave COVID-19, and post-pandemic economic periods. Multi-Criteria Decision Analysis, employing Borda and Keener Ranking techniques, is used to validate the robustness of our liquidity rankings. Our findings reveal that the Russel 2000 Small Cap is the most liquid among traditional markets, while Binance is the most liquid cryptocurrency exchange. Results show that Small-cap indices are generally more liquid than cryptocurrency exchanges. However, during the second wave of the COVID-19 pandemic, individual and institutional investors used cryptocurrencies as a safe haven, with Binance exhibiting better liquidity than traditional markets such as Nifty SC 100. In the post-pandemic period, cryptocurrency market liquidity significantly deteriorated compared to pre-pandemic levels. We argue that despite investors using cryptocurrencies as diversification tools during economic stress periods, cryptocurrencies fail to serve as a dependable asset allocation tool compared to small-cap equities. With contributions encompassing a pre and post-pandemic liquidity assessment, the development of a multifaceted liquidity framework utilizing Multi-Criteria Decision Analysis, and liquidity comparisons between traditional and cryptocurrency markets, this study delivers substantive enhancements to the analysis and understanding of global market liquidity for traders and researchers.

Suggested Citation

  • Bhaskar Tripathi & Rakesh Kumar Sharma, 2025. "Cryptocurrency Exchanges and Traditional Markets: A Multi-algorithm Liquidity Comparison Using Multi-criteria Decision Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 65(5), pages 2649-2677, May.
    • Handle: RePEc:kap:compec:v:65:y:2025:i:5:d:10.1007_s10614-024-10655-9
    DOI: 10.1007/s10614-024-10655-9
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    More about this item

    Keywords

    Liquidity; Cryptocurrencies; Multi criteria decision making; Stock indices;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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