Changpeng Zhao, CEO of Binance, said on social media that large liquidity is one of the best consumer protection mechanisms because it prevents market manipulation, market volatility and reduces liquidation. Imagine if we divided liquidity into 180 countries, this would make it 180x easier for large traders to swing the market and significantly increase volatility.
At this point there will be arbitrage traders trying to balance prices, but they are not as efficient as an order book, and which arbitrage traders will make money (paid by consumers) between both buyers and sellers.
Another misconception people sometimes have: On exchanges, users don’t choose counterparties, they just trade with an order book, but in fact the order plays the role of a broker. Greater liquidity also provides users with better prices, tighter spread, and reduced slippage, which is a very important form of consumer protection.
