The Concept Of Liquidity In The Crypto Market #002
Hello crypto lovers,
How are you doing today? I believe you are doing perfectly fine and are actively promoting steemit across various platforms.
I feel very happy to come before you all today to conclude a topic I started some time ago and that topic is one related to market liquidity.
We explained market liquidity to be the ease at which market participants buy, sell and carry out other activities in the market.
A market is said to be liquid when there is smooth operation in it, when there are lots of active market participants (buyers and sellers).
Today, we shall continue our discussion by learning about the advantages and dis-advantages of market liquidity, please stay tuned.
ADVANTAGES OF MARKET LIQUIDITY
There are so many advantages of having a high liquidity in the cryptomarket and we shall be learning a few
- EASY TRADING:
An easy trading is one of the most beneficial reasons for having a liquid market.
When a market is liquid, there are so many buyers and sellers and as such it becomes easy to execute trades without delay nor complications.
- LOWER TRANSACTION COST:
Another advantage of having a liquid market is that it helps to reduce transaction cost in the market.
The transaction cost most times become much as a result of a wide bid-ask spread, the wider the spread, the higher the transaction cost.
Bid-ask spread is often the different between the buying price and the selling price, and a liquid market helps to reduce the bid-ask spread in the market.
- PRICE EFFICIENCY:
In a liquid market, there happens to be more participants and as such participants can buy/sell commodities at their original prices.
However, when a market is illiquid, participants will be forced to buy/sell at any available price even when it is not convenient.
- INCREASED MARKET STABILITY:
A liquid market helps to increase stability of the market.
In a liquid market where there are many participants, it is very difficult for market price to be manipulated by the whales.
When the market becomes illiquid, whales take advantage of it by manipulating market price to their benefit.
Liquidity in the market helps to guard the market against voluminous moves caused by the whales.
- DIVERSIFICATION:
Diversification in investment opportunities is another advantage of a liquid market.
When a market is highly liquid, participants can choose to invest in any cryptocurrency of their choice, they can choose to try a different type of cryptocurrency and make profit from it.
CONCLUSION
It is very important that a market becomes very liquid because it also helps t attract investors into the market.
When investing in a token, endeavor to confirm how liquid such a market is and avoid markets with low liquidity
Thank you, friend!
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The Concept Of Liquidity In The Crypto is a great article
Yeah it is, thanks for stopping by 😊
Good to know detailed information about liquidity in crypto market. It is very important.
I am glad u loved it, thanks for stopping by
Good to know detailed information about liquidity in crypto market. It is very important.
Thanks for stopping by friend, it's nice to see you around
Since I've been diverting my crypto portfolio and spreading my investments into different project/tokens I've been making profit. Whenever one coin do badly, the rest will make up for it
It is nice to see that you are profiting by diverting your portfolio