It is common to see in the cryptographic environment people who do not seem to understand the difference between highly liquid assets and those that have little (or almost none) liquidity.
In view of what I just mentioned, let's briefly clarify that it is a highly liquid asset and an illiquid asset.
Liquidity is understood in the financial field as the ability of an asset to be bought or sold at any time. So, the greater capacity an asset has in this sense, the greater its level of liquidity; and on the other hand, the lower the interest of people to buy or sell said asset, the lower the level of liquidity.
For example, in the financial sphere, a good example of an asset with a high level of liquidity is gold; because no matter how much it goes up or down (and the reality is that it always remains at very stable prices), it will always be desired and coveted and, therefore; it will always be possible to buy and sell it at whatever price level it is in the market.
With this, we already realize then that a cryptoactive (speaking in the cryptographic field) that has a high level of liquidity, then it is easy to buy and sell at any time we want; and a crypto asset that has little liquidity will generally be easy to buy, but very difficult to sell.
Several factors can be analyzed, but the one I consider to be the top in this regard is the capitalization market. Because although the market cap is not an infallible indicator of economic fluidity and strength of a crypto asset (as we could see in the worst moments of the Terra-LUNA drama), it is a good guide to see the interest of buyers and sellers of a cryptocurrency at any given time.
Highly liquid crypto assets are, for example, Bitcoin, Ethereum; Cardano, Tether, Polygon, etc. Basically, the 20 cryptocurrencies with the highest market capitalization according to Coinmarketcap, are the most solid and liquid in the market; there is no doubt about it.
For someone with little experience in these matters, the issue of the level of liquidity of cryptocurrencies may seem silly or something unimportant, but believe me when I tell you that it is a matter of capital importance, especially when things look bad in the market.
Because as we know, trading and investments are, by themselves, very risky activities, but if we add to this the factor of the cryptocurrency environment (even more full of uncertainty and volatility), then the risk multiplies significantly.
Therefore, when we buy or sell a crypto asset, we are risking losing everything invested in the process. But it is not the same, investing in a project with a low level of liquidity, than in one with a high level of liquidity, because when things turn ugly and the highly liquid crypto asset begins to drop too much; we can sell calmly, because we will find buyers at any price point.
But in the event that we have bought a cryptocurrency with a low level of liquidity, when an extreme bearish scenario arises that does not suit us, it will be difficult for us to find buyers for it; and it may happen that we even fail to sell at all while having to endure the entire crash or possible crash of the crypto in question.
So therein lies the importance of always operating and investing in highly liquid crypto assets, like Bitcoin, like Ethereum, like all those mentioned above.
I mean, if we are going to invest in a project that is not in the top 20 by marketcap, or even in the first 100 (as in the case of HIVE), we must understand the project in question very well.
The truth is that HIVE is a project, platform and cryptocurrency in which I recommend investing; although it does not fit the criteria of what cryptocurrencies are with the highest level of liquidity, but this is it is because I know the project thoroughly and all the potential it has.
HIVE's capitalization level is right now barely $201,628,769, but it is a cryptocurrency that represents a blogging project and platform (hive.blog), which is a social network that works within the framework of what 3.0 platforms are. HIVE allows the contents of the users of its network to be rewarded with each action they carry out and also has a stable token, which is the HBD or Hive Backed Dollar. On Hive.blog, there is no censorship, so no one will be able to block you, nor block nor remove any content you post; because on said platform you are the sole and authentic owner of your account, as long as you safely preserve your private keys (Posting, Active, Owner, Memo).
So owning a HIVE account is like owning a piece of land in a truly free country. And that is why I know that the solidity and liquidity of HIVE as a cryptocurrency, environment and project will grow more and more in the future.
What do you think about the topic discussed? Please comment.
@piensocrates