Solvency is not liquidity and liquidity is not solvency

If you want to understand what happened with FTX, learn the difference between solvency and liquidity.

I see a lot of people claim that FTX had a liquidity crisis. I don’t think that’s correct. I think it had a solvency crisis. These are different things, though insolvency can often cause a liquidity crisis. In any event, Matt Levine seems to agree with me:

Still the distinction matters. Roughly it comes down to: If someone gave you enough time to sell al…