A simple framework for separating volatility from…
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A simple framework for separating volatility from liquidity risk
Price volatility and liquidity risk are related but not identical:
• Volatility describes how much price moves over a period; liquidity describes how easily size can trade without moving price.
• Check spread, order-book depth, volume concentration, and slippage assumptions—not just 24h volume.
• Compare normal and stressed conditions; a market can look liquid until correlations jump or venues diverge.
• Define position size, time horizon, and exit assumptions before interpreting a chart.
No single metric captures execution risk. Treat reported volume cautiously and distinguish realized outcomes from forecasts. What liquidity measure do you track alongside volatility?
#cryptocurrency
Price volatility and liquidity risk are related but not identical:
• Volatility describes how much price moves over a period; liquidity describes how easily size can trade without moving price.
• Check spread, order-book depth, volume concentration, and slippage assumptions—not just 24h volume.
• Compare normal and stressed conditions; a market can look liquid until correlations jump or venues diverge.
• Define position size, time horizon, and exit assumptions before interpreting a chart.
No single metric captures execution risk. Treat reported volume cautiously and distinguish realized outcomes from forecasts. What liquidity measure do you track alongside volatility?
#cryptocurrency
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