3 ms·
I'd like to see qeternity chime in on this, since it's their space, but as market that is too rigid can't actually provide sufficient liquidity to users to func
by chaboud 8y ago
I'd like to see qeternity chime in on this, since it's their space, but as market that is too rigid can't actually provide sufficient liquidity to users to function as an effective market.
Let's say you're comparing a savings account (1% interest, a day to withdraw), six month certificates of deposit (3% interest, six months out), and cash in your pocket (%0 interest, instant), and the goal is to account for market fluctuation in Laffy Taffy and come away with the most Laffy Taffy in a year.
The cash doesn't appreciate, but you can buy whenever the price changes. If Laffy Taffy is really volatile, working in cash gives you the flexibility you need to maximize your trade value and buy/sell at the right time.
If Laffy Taffy never sees a price change, put your money in that CD and wait it out (assuming no other available investment vehicles). You'll be able to buy a little more pancreatic strain in six months.
The savings account is somewhere in the middle.
A really large quantum for a market that attempts to serve as a proxy for real world fundamentals could be prohibitively risky for participants, and that could reduce overall market participation.
I suspect that there is a sweet spot, and I assert (without evidence) that the sweet spot is greater than the time it takes light to circle the globe.