Liquidity in This Altcoin Fell 29%: Why Could Its Price Move More Sharply?

Order book depth within 2% of Solana’s current price has fallen about 29% from last year, signaling that large buys and sells could have a greater impact on the price.

According to CoinGecko data cited by CoinDesk, the value of buy and sell orders within 2% of the market price in Solana’s (SOL) order book was about $28 million on each side last year. This year, that figure has fallen to $20 million.

The roughly $8 million decline on each side of the book shows that the outstanding orders available to absorb large trades have weakened. The key point for investors is that trades of the same size may now be more likely to move the price further.

Fewer orders could lead to sharper price moves

Order book depth shows the total value of orders waiting to buy or sell within a specific price range. In a large sale, buy orders absorb the trade; in a large purchase, sell orders do.

When there are fewer of these orders, completing a large trade may require reaching orders at more distant price levels. This can set the stage for sharper price movements in both rallies and declines. The narrowing in SOL’s 2% range points to a reduced capacity to absorb large buying and selling pressure.

Liquidity near Ethereum’s price has also thinned

A similar contraction is also evident in Ethereum (ETH). CoinGecko measured order book depth within 0.15% of ETH’s market price at $13 million to $14 million. Even so, on most exchanges, both the buy and sell sides have more than $1 million in depth within this narrow range; the company says ETH remains relatively liquid at these levels.

The 0.15% range used for ETH shows orders very close to the price in day-to-day trading, while SOL’s 2% measure also includes orders farther away. For that reason, rather than comparing the dollar amounts of the two assets’ depth as if they were measured on the same basis, changes in liquidity for each should be assessed within its own price range.