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What confuses me about bitcoin, and this current surge, is the lack of liquidity. I don't understand how this might affect the value of bitcoins, but as an exam
by pedalpete 13y ago
What confuses me about bitcoin, and this current surge, is the lack of liquidity. I don't understand how this might affect the value of bitcoins, but as an example, if I were to purchase say $10k in bitcoins and later want to transfer those bitcoins into another currency, I would have to sell my bitcoins in a bunch of small transactions, assuming I can find a buyer wanting to give me Australian dollars for my bitcoins. Of course, this is a problem with all currencies, but we can almost always buy foreign currency from banks, who have the funds to make the exchanges. I just think this 'dealing with a bunch of middlemen' results in bitcoin being more susceptible to bubbles and crashes.
Can somebody set me straight on this?
- nullc 13y agoYou can go to any of the major bitcoin markets and sell thousands of dollars of coins while hardly moving the price for USD. E.g. on MTGOX right now the best bid is $271 and a market order to sell 100 bitcoins right now would net 27056.5448 USD and would take the last price down to 270.1650 USD, resulting in an average price of 270.5654 USD/BTC. Selling 1000 BTC would result in an average price of $266.9482. Its certainly not the most liquid thing and getting funds to and from exchanges (or buying other things) isn't as available as one would hope, but it's not highly illiquid by any means. There are good markets for other major currencies too, though none are quite as liquid as the USD ones.
- unclebucknasty 13y agoHow are you calculating the price movement as a function of order size?