Title: Explain me like i'm 5: Market Liquidity Post by: DimitrisLodirogas on November 15, 2019, 02:33:17 PM :)
Title: Re: Explain me like i'm 5: Market Liquidity Post by: gentlemand on November 15, 2019, 02:42:38 PM Liquidity = the ease at which you can turn an asset into cash.
A market with deep liquidity can absorb large buys or sells without moving much. A market with very little will fall apart at the first sign of one person's big move. Plenty of markets effectively have none. It's all well and good having an impressive headline price for an alt, but when you look at an exchange and the buys waiting it might only take a sell of $100 worth to reduce the price by 50%. A liquid market will have enough buys to swallow that sell without budging. Title: Re: Explain me like i'm 5: Market Liquidity Post by: Wexnident on November 15, 2019, 04:03:10 PM Making a simple comparison, it is like how you can grab a Jenga block without disrupting the balance of literally everything else. Market liquidity in the definition is how you can or someone else, purchase or sell an asset without causing a disrupt or change in the asset's price. You can also take it as somehow similar to demand and supply where, if supply was quite limited but then all of a sudden, the supply suddenly skyrocketed, this could potentially ruin the market economy since supply has caught up to the demand in a quick pace.
One example I remembered was the glitch in TF2 (Team fortress 2) where crates give off the rarest type of virtual item in-game. This lead to skins that usually cost 6000$ to suddenly drop down to 10$ or something similar. Title: Re: Explain me like i'm 5: Market Liquidity Post by: gantez on November 15, 2019, 04:26:15 PM Also, liquidity is the floating cash that you are allowed to trade with. You are actually not allowed but what you have or that which your trading capacity can carry. Either it is leveraged on or your real capital referred to as such.
Title: Re: Explain me like i'm 5: Market Liquidity Post by: wxa7115 on November 16, 2019, 05:47:33 PM An easy way to understand the concept of liquidity is to think of the money in the market as a liquid and about your actions as a piece of sponge, if you want to sell your coins in the market then this is the equivalent of using your sponge to absorb part of the liquid, if the sponge is too big then you will absorb all the liquid and your sponge will not even get wet, but if there is a lot of liquid then your sponge will absorb as much liquid as possible and the amount of liquid will seem to remain the same.
If what you want to do is to buy some coins then this is the equivalent of squeezing every drop from your sponge and if it is too big then the amount of liquid will increase too much, but if the sponge is small then this is the equivalent of pouring a few drops in the ocean. The explanation is a little bit ridiculous but I hope you get the point. Title: Re: Explain me like i'm 5: Market Liquidity Post by: tranduong123 on November 18, 2019, 03:12:02 AM Liquidity = the ease at which you can turn an asset into cash. I think your opinion still needs to add that, the market liquidity is the ability to quickly buy or sell goods on the market without being affected by the price factor. And the time to buy and sell groceries is usually shortTitle: Re: Explain me like i'm 5: Market Liquidity Post by: DimitrisLodirogas on November 25, 2019, 08:24:35 AM Liquidity = the ease at which you can turn an asset into cash. Helped a lot. Thank you for the explanation. No wonder CMC+s main indicator won't be trade volume but liquidity. A market with deep liquidity can absorb large buys or sells without moving much. A market with very little will fall apart at the first sign of one person's big move. Plenty of markets effectively have none. It's all well and good having an impressive headline price for an alt, but when you look at an exchange and the buys waiting it might only take a sell of $100 worth to reduce the price by 50%. A liquid market will have enough buys to swallow that sell without budging. Title: Re: Explain me like i'm 5: Market Liquidity Post by: BaseFEX on November 26, 2019, 04:28:12 AM Liquidity = the ease at which you can turn an asset into cash. Helped a lot. Thank you for the explanation. No wonder CMC+s main indicator won't be trade volume but liquidity. A market with deep liquidity can absorb large buys or sells without moving much. A market with very little will fall apart at the first sign of one person's big move. Plenty of markets effectively have none. It's all well and good having an impressive headline price for an alt, but when you look at an exchange and the buys waiting it might only take a sell of $100 worth to reduce the price by 50%. A liquid market will have enough buys to swallow that sell without budging. Generally speaking, liquidity is how easily an asset or security can be bought or sold in the market, and converted to cash. From the cryptocurrency exchange and its traders' perspective, there are three common measures on market liquidity:
Title: Re: Explain me like i'm 5: Market Liquidity Post by: DimitrisLodirogas on November 26, 2019, 07:58:08 AM Liquidity = the ease at which you can turn an asset into cash. Helped a lot. Thank you for the explanation. No wonder CMC+s main indicator won't be trade volume but liquidity. A market with deep liquidity can absorb large buys or sells without moving much. A market with very little will fall apart at the first sign of one person's big move. Plenty of markets effectively have none. It's all well and good having an impressive headline price for an alt, but when you look at an exchange and the buys waiting it might only take a sell of $100 worth to reduce the price by 50%. A liquid market will have enough buys to swallow that sell without budging. Generally speaking, liquidity is how easily an asset or security can be bought or sold in the market, and converted to cash. From the cryptocurrency exchange and its traders' perspective, there are three common measures on market liquidity:
Thank you for explaining thoroughly and clear. Like the CMC stated liquidity is a better indicator than trade volume. Good trading day! |