Crypto is one of the most misunderstood assets in this world. Sure they may have a higher trading volume than almost all of the most traded commodities combined, but when it comes to solid expertise and know-how, good information can be extremely limited.
If you are familiar with liquidity, then you already likely know just how important it is when looking into acquiring a new asset. Moreover, despite popular belief, liquidity also plays a vital role in the crypto market, and understanding how it works can allow you to make more informed decisions about which cryptos you may want to pick up in the future.
In this article, we will be giving you an overview of liquidity in the crypto market, as well as telling you some essential information you need to know about crypto liquidity if you are thinking of/have already invested in crypto yourself.
No Waiting Times or Unnecessary Hold-Ups
When it comes to the question of what liquidity means for crypto, there are a variety of answers that would be viable. However, perhaps the most prominent aspect of crypto liquidity that you need to know is that liquidity is incredibly high.
Most cryptos are a high-liquidity investment, meaning you can make new investments and sell current ones at just a moment’s notice. This is simply down to the fact that there are no waiting times or unnecessary hold-ups – something that is incredibly prevalent with regular investing.
With regular stocks, you will usually have to wait a set period of time before you are actually allowed to sell your investment. The length of time varies between different investments, but it is usually the next business day depending on what time you decide to sell.
This makes regular investments less liquid than crypto, and this gives crypto a variety of advantages. To give an example; if a regular stock were to plummet at the time when you were trying to pull your investment out, there would be absolutely nothing you can do.
Alternatively, with crypto, you can sell off your investments near-instantly, meaning you have much more control over what happens to your capital. As you would expect, higher liquidity is generally always a good thing for investors, and the fact that the vast majority of cryptos have high liquidity is undoubtedly a major positive for many people.
It is worth noting that this isn’t the case with all crypto. Some cryptos have certain wait times where you are not able to liquify your investment in an effort to reduce volatility, and these serve a vital purpose in the market. However, crypto is in-general incredibly liquid, and this simply means that you can invest or sell whatever you may want.
The Ability To Trade At Any Time You May Wish
Another key benefit of crypto when compared to more traditional investments is that you have the ability to trade at any time you may wish. When trading on the stock market, you can only invest/sell during business hours.
This drastically hinders your control over your investments, and as you may expect, you will be completely vulnerable to any fluctuations in the market that occur during these times. Luckily, crypto does not suffer from this same fate.
Most crypto platforms allow their users to trade 24/7, and this can allow you to do whatever you may want with your investments whenever you may wish. You are not restricted by arbitrary trading times in order to do your bidding; you can do what you want, when you want.
Once again, this just goes to add to crypto’s liquidity exponentially. Moreover, crypto is one of the few investments that actually have this attribute, as the vast majority of other investments take place over the stock market rather than the blockchain.
This can also mean that you can immediately sell/buy if you think a lucrative/disastrous situation was to occur – yet another massive advantage that crypto has over regular investments. The fact that investors can trade at all hours with crypto is truly incredible, and this is among the chief reasons as to why many professional investors include crypto in their portfolios.
You Are Fully In Control Of Your Assets
Taking into consideration everything we have said about crypto’s liquidity thus far, you should be getting a pretty good idea about just how liquid is. Crypto is perhaps the epitome of liquidity, and there are very few other investments that boast the same liquidity as this.
Liquidity in the crypto market is not all too difficult to understand. If you are accustomed to what liquidity refers to with regular investing, you will already have a pretty good idea as to what it means in the crypto market, and simply understanding what liquidity is and what it does is going to be hugely beneficial.
We hope you will now factor liquidity into the equation when thinking about picking up a new investment – it may just end up saving you from a catastrophe way down the line. Good luck.