**5. Conclusions**

Liquidity has been one of the principal interests of investors and speculators when they decide how to conduct active trading on a particular asset. Cryptocurrencies constitute innovative forms of investment assets where markets are characterized by high levels of herding behavior and a very large portion of market capitalization is concentrated in a small number of important currencies.

This study undertakes the task of estimating the level of liquidity during bearish times in cryptocurrency markets for every digital currency on about which full data are provided in a daily frequency. Thereby, the extra-bearish second phase of downwards movements in digital currency markets is under scrutiny, spanning from 1 April 2018—when the second very sudden drop in digital coin prices took place—until 31 January 2019 when the market started recovering. This paper casts light on whether the active trading preferences of investors are more favorable for well-established cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin, BitcoinCash, Cardano, Stellar and Nem. Previous academic work (Bouri et al. 2019a) has identified these currencies as the primary determinants of herding behavior.

The Amihud's illiquidity ratio by Amihud (2002) enables us to categorize the finally short-listed digital currencies into eight groups, where the first group stands for lower values of the ratio, that is the most liquid cryptocurrencies. Results reveal that the leading virtual currencies that also exhibit the highest market capitalization in normal times, remain the most actively traded digital assets also during bearish periods. 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 first group that presents the highest levels of liquidity. On the other hand, the eighth (least liquid) group comprises of significantly less known virtual coins that are much more costly and time-consuming to invest in. This group of least liquid currencies present values for Amihud's illiquidity ratio that are significantly lower than those of previous groups. Lower spreads and lower transaction costs remain the basic determinants of popularity that most liquid cryptocurrencies enjoy, even in distressed times. It is worth noting that the highest-capitalization digital currencies remain the most liquid during distressed periods. Intriguingly, the most liquid currency is found to be the TrueUSD stablecoin which is tied to the US dollar. This reveals that during bearish trends in the cryptocurrency market, investors are slightly more adverse to risk. This is the reason why they diversify their portfolios through the inclusion of less volatile currencies tied to legal and widely-approved forms of money.

This paper is the first one to provide an overall view of the liquidity levels concerning a very wide range of digital currencies during the intensely bearish period in digital currency investments. The main research axis of this study lies on investigating how the popularity and the incumbent character of specific coins in the virtual currency markets a ffect decision-making about active trading. Our results reinforce previous findings that support the existence of a leading group of high-capitalization currencies being the determinants of herding behavior and the vivid investor sentiment in cryptocurrency markets.

**Author Contributions:** Conceptualisation and methodology, N.A.K.; software and validation, P.P.; investigation, N.A.K. and P.P.; writing—original draft preparation, N.A.K. and P.P.; writing—review and editing, N.A.K. and P.P.; and supervision, N.A.K.

**Funding:** This research received no external funding.

**Conflicts of Interest:** The authors declare no conflict of interest.
