I’ve been getting into finance, stonks and crypto lately and I love researching and learning. But one word I’ve never fully understood is “liquidity”.
What is it?
Does it mean cash?
Does it mean a bunch of stocks?
Is it a noun, an adjective?
What does it mean to provide liquidity?
What does it mean to liquidate?
What does it mean to be solvent/insolvent?
I’ve looked on many different articles and sources and I still can’t find a way of thinking about it that makes sense in all uses of the word
In: 7
All the posts here mention cash. That’s an old school way of thinking. Being liquid means being able to convert it into goods and services. Cash is liquid, but in some circumstances Venmo is more liquid (like during covid when people didn’t want your dirty money).
No matter what the asset, the easier and more readily it can be spent, the more liquid it is
To liquidate is to make assets more liquid (usually to satisfy debts). Being solvent means you have enough liquid (i.e.: you can buy the things you need) while being insolvent means you can’t. (You may have assets, bit there is not enough liquid to *dissolve* them).
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