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How is it clear that the exchanges don't have liquidity?
by lostsock 9y ago
How is it clear that the exchanges don't have liquidity?
- jorblumesea 9y agoThe way the system works provides little in any sense of a line of liquidity. Unlike normal banking the exchanges operate ledgers where the fiat currency they have on hand is directly tied to how many people have put fiat currency into the exchange network. Given the extremely rapid rise of the price of BTC, it's extremely unlikely they have anywhere close to the amount of fiat currency if large numbers of people cash out.
- pas 9y agoExchanges are not market makers. They don't have to be able to allow everyone to "cash out", they are not banks. Exchanges provide a venue for buy-sell to meet. If someone wants to "cash out", someone has to want to "cash in". Lately every time the price dropped folks saw it as the time to buy more, or just "finally buy bitcoin, because it'll go up soon". A big crash happens when the equilibrium shifts drastically, when more people wants to get out than get in, it'll crush the price (because more people wanting to get out will lead to even more people wanting to get out).