Origin Dictionary / OD-050
Liquidity
The screen shows a price. Your whole position may not fit through it.
01Dictionary Meaning
Market liquidity is the ability to buy or sell an asset promptly, in meaningful size, without causing a large change in its price.
02What People Think
"My balance equals the displayed price multiplied by my holdings."
03What’s Underneath
The most recent trade may have been small. Selling a much larger position requires enough buyers, or enough assets in a trading pool, at acceptable prices.
If that depth is missing, successive parts of the sale can receive worse prices. A token can therefore show a large market value without offering holders an equally large pool of cash to withdraw.
Liquidity can also weaken just when many people want to leave. A normal-day quote does not promise a stress-day exit.
04The Game
How much can actually trade near the displayed price, and how does the answer change when other holders want the same exit?
05One Line
A quoted price is not an offer to buy everything you own.
Explore M3 Library
M3Crypto Investor Consciousness
Follow what makes a market price usable.
References 2
- Extended-Hours Trading: Investor Bulletin
SEC Investor.gov
- Types of Orders
SEC Investor.gov