Understanding Crypto · Lesson 2 · Beginner
Salability, liquidity and slippage
You understand why weak salability leads directly to slippage and dangerously thin order books.
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Salability
Salability per Menger: a good is sellable at any time with little loss of value. Three dimensions: across quantities (scales), across places (space), across time. The fourth: at the will of the holder.
For the trader this translates directly: good salability across quantities plus liquidity means tight spreads and deep order books. An obscure coin has the opposite. The order book and slippage mechanics in detail are in grundlagen orderbuch-spread-slippage, here the money point counts: weak salability is expensive.
Read the order book: where does a market order eat into the price?
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Test yourself
You want to sell 50,000 USD out of a thin altcoin via market order. What happens?
- You fill at the best bid without any discount
- You eat through several levels, the fill is well below the top bid
Which salability dimension does self-custody secure?
- Salability at the will of the holder
- Salability across time
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The key points at a glance
- Salability means: sellable at any time with minimal loss of value.
- A thin order book has wide spreads and gets cleared out by a single large market order.
- Self-custody secures salability at your own will, only whoever holds the keys can sell without a third party.
Deep dive
Spread as the first hidden cost factor
The bid is the best buy price, the ask the best sell price, the spread their difference. On BTC it is razor-thin, on an obscure coin it can get absurdly wide. If the bid is at 65,000 and the ask at 70,000, you lose 5,000 instantly if you buy and sell right back.
- High liquidity squeezes the spread together
- BTC and ETH are cheap to trade, small coins expensive
- A setup on a wide spread has to be that much better just to earn the cost back
How a market order eats through the order book
A market order takes the cheapest opposite side, then the next more expensive level, and so on. In a thick book you barely notice it. In a thin book you clear several levels and get an average well below the first bid. That difference is slippage.
With leverage this is doubly dangerous, because a forced liquidation also executes as a market order and hits a thin book exactly when depth is at its lowest.
Why there is no single crypto price
The market is spread across many exchanges and fiat pairs as separate liquidity pools, and arbitrage is delayed by transfer times. That is why futures settle not on one exchange but on an aggregated index that the mark price and liquidations track.
This protects you from a manipulated spike on a single thin exchange. You can practice reading the order book and building a feel for slippage risk-free on the demo exchange.
Sources: Ammous, Burniske/Tatar, Goodman
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