As an example of liquidity issues on exchanges, I've got a ~500btc long that took me an hour and a half (in an above average volume period) to get into without moving the market. It took a combination of small market orders, limit orders, hidden orders... for all intents and purposes it was difficult. If I had wanted to buy $200k in nearly any stock I would have faced a few cents in slippage from a market buy order at the most. However, market buy 500btc on bitfinex and see what happens...

The opposite is also true for when you want to get out of your position. It's easy for hedge funds and mm's to trade thousand share lots of something like GOOG day in and day out, because they know their stop will be honored and the liquidity is there. I can't just set a sell stop for 500btc at 399.99 for instance. It would rocket the price down to 395 at the minimum. And while $200k is a lot of money for most bitcoiners, it isn't jack shit in the world of finance and investing. I actually get a big sigh of relief when I trade stocks (and even options) because of the liquidity and the ability to set stops and not worry about slippage. The other thing the lack of liquidity does is keeps me (for better or worse) from trading too frequently. My long from 420 is still open and my stops are very far down. If I tried to play every little up and down with that much BTC I'd get fucked. So you gotta pick a spot, open it, and be calm. Which a lot of HF and MM's wouldn't like at all. All it takes is both market cap and some way to trade bitcoin on a real exchange (i.e. nyse, nymex, cboe, amex, etc) and things are going to change rapidly I think. Institutional MM's don't give a shit about long term trends or the future of bitcoin, but if they could make a market in bitcoin profitably (and safely from a regulatory standpoint) you bet your ass they would.