# kaal:claim:3396522-021

**Claim.** Extreme illiquidity combined with the herd mentality of crypto investors systematically benefits speculators, because it lets apparent scarcity materialize out of nowhere precisely when investors are about to decide, prompting misinformed buy and sell decisions.

**Type.** mechanism  **Support.** argued

**Holds when.**

- holds in deeply illiquid markets where speculators control supply

**Source quote.**

> The very high illiquidity of the cryptocurrency market in combination with the herd mentality of crypto investors benefits speculators because it allows scarcity to appear out of nowhere including for investors who are about to make an investment decision.

**From.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, *Stable Cryptocurrencies* (2019), IV. Stable Cryptocurrencies, 5. Transforming Cryptocurrency Market Structure, page 33

**Cite as.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019). SSRN: https://ssrn.com/abstract=3396522

**Verify.** sha256 of source PDF `ef5031b16aa53476ed618f0bdf92601cd4affb893692c701134bd9cba3ea8acf` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20et%20al.%20-%202019%20-%20Stable%20Cryptocurrencies.pdf

**Failure mode.** speculator-informational-advantage  (family: information-asymmetry)

**Topics.** defi, risk-and-incentives, disclosure

**Keywords.** speculation, illiquidity, herd-behavior, information-asymmetry, investor-protection

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