Comment by cinntaile | Hacker News Reader

Comment by cinntaile | Hacker News Reader

Parent Full thread

The usual way to determine if an exchange is liquid for a particular trading pair is the spread between the buy and the sell. If you can buy or sell it quickly for an agreed upon price it's liquid. That's all there basically is to liquidity. Now lets add the constraint that you want the buying or selling to happen at the intrinsic value. If crypto has no value then everything above it is basically a bonus, so by definition crypto is liquid.

Sure when volatility gets too high on the real stockmarkets, they temporarily pause the share or the exchange and make it, by definition, illiquid. This is however a completely artificial limitation and there is nothing inherently contradictory about having high volatility and high liquidity.

I presume you belong to the school of thought that says if you can't do a cash flow analysis then it doesn't have value. But I don't get that, there are tons of things that have value without being able to do a cash flow analysis on it.

I'm not interested is discussing crypto's made up redefinitions of long standing, well understood financial terms.

Crypto is illiquid. It has no intrinsic value.

I took the financial definition, there is no special crypto definition. Here's a few paraphrased definitions:

> liquidity describes the degree to which an asset can be quickly bought or sold in the market at a price reflecting its intrinsic value.

> A liquid asset has some or all of the following features: It can be sold rapidly, with minimal loss of value, anytime within market hours. The essential characteristic of a liquid market is that there are always ready and willing buyers and sellers.

Now read the first definition for example and the first paragraph of my previous post, follow the logical structure of my argument and tell me what doesn't add up. You make the assumption that it's worthless, the implicit assumption in the definition is that you don't sell for a loss basically. Since you're always above zero, it fits snugly in there.

https://www.investopedia.com/terms/l/liquidity.asp

>without affecting its market price

I have replied to this before, but I can add some additional info. No regular buyer or seller has the capital to affect the market price in any significant way. Huge orders don't end up on the market, just like on regular exchanges, precisely for this reason.

> No regular buyer or seller has the capital to affect the market price in any significant way

Which is absolutely not the case in crypto, further evidence of how illiquid it is.

What do you base this on? I don't see how you can affect the market price of any of the big crypto's in any significant way as a regular buyer or seller, there are simply too many market participants. This is not the case for the smaller ones obviously, although even there you'll likely need a bit of capital (compared to the other market participants for that specific crypto). The smaller ones are basically a drop in the ocean compared to the big ones.

Reply on news.ycombinator.com