How does OTC short interest affect the liquidity of digital assets?

3 answers

• Thế Vinh LươngJun 28, 2022 · 3 years ago
  OTC short interest can have a significant impact on the liquidity of digital assets. When there is a high level of short interest in the OTC market, it indicates that there are a large number of traders betting against the price of a particular digital asset. This can create downward pressure on the asset's price, leading to decreased liquidity as sellers outnumber buyers. Additionally, high short interest can discourage new buyers from entering the market, further reducing liquidity.
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• Sofia LAZARMar 14, 2024 · a year ago
  Short interest in the OTC market can affect the liquidity of digital assets in several ways. Firstly, it can create a negative sentiment among investors, causing them to sell their holdings and reducing overall liquidity. Secondly, it can lead to increased price volatility as short sellers try to cover their positions, which can deter buyers from entering the market. Lastly, high short interest can also lead to a lack of market depth, making it harder for large buyers or sellers to execute trades without significantly impacting the price.
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• khalique joyoApr 11, 2025 · 4 months ago
  From BYDFi's perspective, OTC short interest can impact the liquidity of digital assets by creating an imbalance between buyers and sellers. When there is a high level of short interest, it can lead to a decrease in demand for the asset, resulting in lower liquidity. This can make it more difficult for traders to buy or sell the asset at their desired price, potentially leading to increased transaction costs. Therefore, it is important for traders to closely monitor OTC short interest and its potential impact on liquidity when trading digital assets.
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