"Bah, liquidity, that's just a word unscrupulous finance types use to defend squeezing profits out with HFT and all that nonsense. We'll entirely eliminate the need to worry about it in the bright new cryptocurrency-fueled economy."https://twitter.com/cperciva/status/954532489174765568 …
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Liquidity is also multidimensional (it's made of depth, speed, transaction costs, etc., and an instrument can be liquid in some ways and not in others). It's also an interesting asset in that -- like electricity -- it must be consumed as it's produced; you can't easily store it.
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That means that a seemingly liquid asset can suddenly become illiquid. In theory you could store liquidity using derivatives to let people hedge future lack of liquidity, but I don't know of many examples. A market that shows expectations of liquidity risk would be interesting.
End of conversation
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What is your definition of material here? My guess is you could probably sell at least $10M worth of BTC without much slippage.
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Instead of pontificating, this is fairly easy to quantify, e.g. looking at trade volumes. “But m-m-muh wash trading!!!” - look at how much can be bought/sold a day with minimal slippage (keeping in mind block trades go through OTC).
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