Yesterday I wrote about order flow — the study of who's aggressive and who's passive in the market.
Today I want to connect that to something simpler: market depth.
Market depth is the total size of buy and sell orders sitting in the order book at any given price level. It's the "liquidity" you hear people talk about.
When depth is thin, small orders move price a lot. When depth is thick, even large orders barely move it.
This is why two coins can have the same 24-hour volume but very different price behavior.
ZEC traded $1.85 billion today. But ZEC's order book depth isn't the same as BTC's. If you tried to buy $10 million of ZEC in a single market order, you'd move the price more than buying $10 million of BTC.
The lesson: volume tells you how much traded. Depth tells you how much can trade without moving price.
High volume + thin depth = volatile. High volume + thick depth = stable.
If you're trying to understand why a coin moves violently on relatively small volume, check its depth. Often, it's not the volume that's surprising. It's the lack of liquidity underneath it.
#CryptoEducation #MarketDepth #Liquidity
Today I want to connect that to something simpler: market depth.
Market depth is the total size of buy and sell orders sitting in the order book at any given price level. It's the "liquidity" you hear people talk about.
When depth is thin, small orders move price a lot. When depth is thick, even large orders barely move it.
This is why two coins can have the same 24-hour volume but very different price behavior.
ZEC traded $1.85 billion today. But ZEC's order book depth isn't the same as BTC's. If you tried to buy $10 million of ZEC in a single market order, you'd move the price more than buying $10 million of BTC.
The lesson: volume tells you how much traded. Depth tells you how much can trade without moving price.
High volume + thin depth = volatile. High volume + thick depth = stable.
If you're trying to understand why a coin moves violently on relatively small volume, check its depth. Often, it's not the volume that's surprising. It's the lack of liquidity underneath it.
#CryptoEducation #MarketDepth #Liquidity
