#Liquidity101

The matter is more important than you think

Liquidity is not just a technical term; it is the lifeblood of cryptocurrency trading. This article explains what liquidity is, why it affects your profits, and how to avoid falling into the trap of low liquidity.

Most traders focus only on the price, but if you ignore liquidity, you are missing half the picture.

Here’s why liquidity is important in cryptocurrencies, and how it can contribute to the success or failure of your trades:

What is liquidity?

Liquidity means the ease of buying or selling a currency without significantly impacting its price.

Simply put:

High liquidity = Fast trades, narrow spreads, stable prices

Low liquidity = Slippage, delayed executions, and unexpected losses

Real-world example:

Let’s assume Bitcoin (BTC) is trading at $103,771 on a high-volume trading pair like BTC/USDT.

You place a buy order worth $10,000. It is almost immediately filled at the expected price. Smoothly.

Now try that with a low liquidity altcoin on a random pair.

Buying the market for $10,000 may cover large portions - and you end up buying at a price 3-5% higher than the market. This slippage is due to poor liquidity.

Why does this matter to you:

• Your trades are executed faster

• You avoid unwanted price spikes or drops

• You get fairer prices when entering and exiting.