Short excerpt from a YouTube video ("Futures Market and Price Discovery" by Kosta Ouzas) explaining the mutual relationship between liquidity and price in futures markets. The speaker emphasizes that liquidity and price are tightly linked and then describes the composition of open positions by leverage levels ranging from 25x down to ~3x (near-spot).
It is like chicken and the egg. You need liquidity to influence price, and price influences liquidity. You cannot have one without the other. They are one and the same. They are completely correlated. So here we go. Want to add in the liquidity now. So now we can see what we're looking at here now is we're looking at all of the positions. The composition of positions from 25x leverage, 10x leverage, 5x leverage, all the way down to 3x leverage, which is basically almost like spot.
