When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

Question

When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

In: 103

Answer 1

It’s sorta hard to say. You’re taught that the price is found by the demand meeting supply: high demand and low supply makes the price go up, low demand and high supply makes the price go down.

But when guys like Doug Cifu, [Virtu Capital](https://en.wikipedia.org/wiki/Virtu_Financial) CEO says [they can supply “infinite liquidity” (it’s just after the 3 minute mark)](https://www.cnbc.com/video/2022/06/08/virtu-financial-ceo-weighs-in-on-payment-for-order-flow-regulation.html), it sounds like the firms that are actually executing the orders can just make infinite supply. As he describes it: if an order for 1000 shares comes in, and there are only 200 shares available to sell, they’ll still sell the 1000 shares. “That’s meaningful liquidity.”

I’m not a financial guy, but that sounds like a scam.