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Research & Blogs

For Use as Collateral, All Tokens are NOT Created Equal…

Dave Weisberger

Dave Weisberger

November 08, 2023

On @cryptotownhall Thursday August 23rd, we were having a discussion of the ability for potential competitors to Ethereum to be able to supplant its role as a dominant Layer 1 for smart contracts. During this discussion, I noted that there was a massive difference in liquidity between most Alts and Ethereum and that makes their use as collateral in financial transactions, including in DeFi, problematic, unless exchanges applied a liquidity based “haircut” to less liquid assets. To illustrate, I compared the cost to sell $10 and $15 Million of notional value of Ethereum, Solana, CRV, and BNB using smart order routing across the major Alt exchanges outside of the U.S. (Okx, Binance, KuCoin, Huobipro, ByBit & Gateio).

The following table shows the results using CoinRoutes Cost Calculator, which accesses the full order books of all the exchanges in real time. It shows for each of the assets, the last price that would be reached across exchanges as well as the average price for filling a hypothetical order of that size:


Order Size

Terminal Price % Move

Average Price % Move


$10 Million



$15 Million




$10 Million



$15 Million




$10 Million



$15 Million




$2.5 Million



As one can see from the table, there is a massive difference in immediately available liquidity on Centralized Exchanges for these assets. CRV, as an asset predominantly used in DeFi, was particularly illiquid, with only $2.5 Million in bids across those exchanges on the full order book down to a price of 0.0001. Obviously, using CRV as collateral for a loan over $100 million would be problematic with such poor available liquidity.

Additionally, considering the relative illiquidity of BNB, it also calls into question recent market commentary about its connection to Bitcoin price action.

Over the past week, Crypto Twitter (X) has been rife with rumors of Binance having issues if BNB moves below 212 and then, when it did, those rumors changed to concerns about BNB falling below $200. The rumors suggested that Bitcoin was being sold to help Binance maintain the price of BNB and that selling was a material reason for Bitcoin’s current price. That explanation did not make much sense to me, but this liquidity analysis shows why. As selling $15 million in BNB at once would move the price well below either “critical” level its seems obvious that it is not being intentionally attacked. Moreover, if someone was defending the price, the order books would not be quite so sparse. Simply put, the relative illiquidity of BNB makes such a theory improbable, to say the least.

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