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How can a currency have an exchange rate of infinity?
by oscilloscope 13y ago
How can a currency have an exchange rate of infinity?
- XorNot 13y agoInfinity isn't a number to start with, it's an expression of a limit. i.e. if you need something, then how much you'll pay for it is effectively unlimited. The idea is, that how the price changes is basically only limited by how quickly your various agents can buy it. You see the problem with this when artificial agents get into bidding wars - because they react so quickly, they end up creating massive price volatility because when it's worth buying its worth buying and when it should be sold they can't dump it quick enough. In practice every thing has some type of limits - i.e. even computers operate over limited time intervals, and any individual actor has limited resources so eventually something exhausts itself (i.e. everyone might have dumped Currency 1 for Currency 2, but even if no one holds any any more, they'd still be trying to sell it off if they did - ergo, we never reached a finite "price" for it.