3. Businesses are affected by the markets their shares trade in. Earnings can be depressed by increased costs of capital, sentiment and anti-competitive pressures from shareholders who hold the entire market.
The first one isn't even a real argument. That is claiming new initiatives just won't happen - if you stop being passive for exploiting this new market, not everyone is passive anymore. And about disposing, well, this is where the profits come into.
The third is mildly concerning. If a few companies are swimming in money, they may disturb every market around. Historically this don't last for long, every time the market gets like this, there comes a crisis and destroys those big players. Worth keeping an eye to a "this time is different" event.
With high-frequency and algorithmic market-makers, there is no such thing as low liquidity. Bid-ask spreads are at all-time lows as algo market makers try to one-up each other to squeeze spreads and provide liquidity.
Passively investing people still buy and sell. It's just that the triggers are based on their personal finances (got a windfall / need to buy new car...) rather than how the market is doing.
1. You may not even be able to acquire shares or to dispose of them (everyone is passive!)
2. Low liquidity + required multiyear holding times = dramatically increased risk
3. Businesses are affected by the markets their shares trade in. Earnings can be depressed by increased costs of capital, sentiment and anti-competitive pressures from shareholders who hold the entire market.