TL;DR
-
‘There’s a lot of liquidity in the market’ = ‘there’s a lot of accessible money in the market.’
-
‘Bitcoin is highly liquid’ = ‘there’re plenty of people out there that will trade you their cash for your Bitcoin.’
-
More liquidity = more people working in the space = more innovation = market growth = your crypto investments growing in value (in theory).
Full Story
When exploring the crypto space, you’re going to hear the word ‘liquidity’ get thrown around a lot.
Annoyingly, it’s a word that can take on a few different ‘shades’ of meaning…
So let’s go over a few:
When you hear ‘liquidity,’ in relation to the overall market, think: ‘accessible money.’
E.g. ‘there’s a lot of liquidity in the market’ = ‘there’s a lot of accessible money in the market.’
Ok. But what does that mean exactly – how do you ‘access’ this money?
It could be via investors (e.g. venture capitalists), loans, or trade (e.g. trading your assets for cash).
Here’s another ‘shade’ of liquidity for you:
When you hear that something is ‘highly liquid,’ think: ‘it’s easily traded for money.’
E.g. ‘Bitcoin is highly liquid’ = ‘there’re plenty of people out there that will trade you their cash for your Bitcoin.’
On the flip side, fine art is relatively illiquid – there’s not THAT many people willing to buy fine art, which means it’s harder to sell (liquidate) quickly.
Ok, so why the terminology lesson?
Well, it’s all leading into today’s news:
The venture capital firm ‘Coinfund’ just raised $152M to put into earl-stage crypto & AI startups.
This money will add liquidity to the market, once it’s deployed (invested).
$152M ain’t a lot of liquidity (accessible money) on the grand scale of the overall market – not by a long shot!
But given investment in the crypto space (specifically) has dried up so much over the past year – it’s a great first step to recovery!
Why should you care?
More liquidity = more people working in the space = more innovation = market growth = your crypto investments growing in value (in theory).
Nice!
