**Table 1.** *Cont*.


### **Table 2.** Groups of less liquid cryptocurrencies.


1.15 × Fluz Fluz



Bitdeal 1.16 × 2.49 ×

6.53 ×


**Table 2.** *Cont*.

It can be observed that the most important coins in the cryptocurrency markets, such as Bitcoin, Ethereum, Monero, BitcoinCash, IOTA, Tether, EOS, Ethereum Classic, Stellar, Stratis, Dash and Cardano remain the most popular across investor trading preferences even in bearish periods, despite their large price decreases. In this highest liquidity group, the Amihud's illiquidity ratio takes values from 9.09 × 10−<sup>28</sup> (most liquid) to 5.66 × 10−<sup>12</sup> (least liquid in this group). The number of active traders of these currencies remains high as it costs less for investors and speculators to trade with these coins due to lower spreads as well as lower transaction costs. Investors believe that if the liquidity of a cryptocurrency is low, it is more difficult to make profit from it as it would be more time-consuming to find a preference matching with other traders willing to make the opposite move. This is why more liquid assets are found to be more preferable during distressed times and not only during flourishing periods that previous academic work has shown (Wei 2018).

On the other hand, less known virtual currencies such as the 808, Dix Asset, Sprouts and WeAreSatoshi appear to exhibit much lower levels of liquidity. More specifically, the Amihud's illiquidity ratio takes values from 1.95 × 10−<sup>6</sup> to 0.017296 in this eighth group of currencies that stands for the least liquid digital coins. This provides evidence that investors do not prefer during bearish periods currencies that traditionally exhibit low market capitalization, as they are considered more costly to invest in.

Overall, our findings are partly in line with conventional methods for measuring liquidity, based on, such as, the market capitalization or the trading volume of digital currencies. As one can easily observe, the grea<sup>t</sup> majority of high-capitalization cryptocurrencies are found to be the most liquid ones according to the Amihud's illiquidity ratio. Moreover, lower-capitalization currencies are part of the lower-liquidity groups based on the categorization performed by Amihud's method. Liquidity examination based on trading volume brings about similar outcomes.

The results of our study are informative about the potential that investors have on substituting investments in high-capitalization cryptocurrencies with lower-capitalization ones during turbulent times when market values of Bitcoin are decreasing. Evidence reveals that there is little tendency of economic agents to invest in alternative digital currencies, but only in the best-known ones. It is remarkable that the most liquid currency during this bearish period, which leaves Bitcoin at the second place, has been the TrueUSD stablecoin that is tied to the US dollar. This is very informative about investors' preferences during distressed times. Notably, they do not abandon investments in the already unstable cryptocurrencies in order to invest in less known and probably more volatile ones, but they rather invest in a coin tied to the most prestigious international currency that carries a global legal tender. These findings reveal that economic units tend to diversify their portfolios and hold a mildly more risk-averse investment profile during crises rather than a more risky attitude.
