Liquidity Metrics

Liquidity metrics help assess the concentration and distribution of liquidity across different tokens and platforms. These metrics are crucial for understanding the risk associated with liquidity provision and the potential for price manipulation.

• Total TVL (in USD): Represents the total value locked in all liquidity pools.
• Nakamoto Coefficient: Indicates the number of entities controlling more than 50% of the liquidity.
• Max Power Ratio: Measures the dominance of the top liquidity provider.
• Redemption Liquidity: Evaluates the available reserves for redeeming wrapped assets or stablecoins.
• Gini Coefficient: Measures inequality in liquidity distribution, with values near 0 indicating even distribution, and values near 1 indicating concentration among few providers.
• Shannon Entropy: Assesses diversity of liquidity distribution, suggesting market resilience with higher values.
• Herfindahl-Hirschman Index (HHI): Measures concentration by summing squared percentages of shares, with lower values indicating distributed liquidity.
• Theil Index: Indicates deviation from perfect distribution, showing concentration among fewer providers.

Utilizing these metrics, we offer insights into the health and stability of liquidity environments, supporting traders in risk assessment.

Example dashboard utilizing the metrics and Bitpulse data: