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What is Liquidity?


Liquidity Limited Liquidity can be easily found in markets compared with more mature and traditional economies, such as the foreign exchange market. Simply put, the total value of money is well over $90 trillion; however, the Cryptocurrency market is around $700 Billion, a 12800% difference.  This difference is also evident in trading volumes. Daily cryptocurrency trading volumes are about $200 billion compared to daily forex traders that cap at $5 trillion.

In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold.

In the context of cryptocurrencies, liquidity is the ability of a coin to be converted into cash or other coins easily without disrupting prices. A high liquidity is preferred and indicates a stable market. In a highly liquid market, people can trade easily, quickly, and at fair prices.

Liquidity in Forex Trading would be referred to as how active a market would be. It would be determined by how many traders are currently trading and the total volume of that they're trading. One reason the foreign exchange market is considered to be so liquid would be that because it is accessible 24 hours a day during weekdays.


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