💧 #Liquidity101 – What is liquidity and why does it matter?
In the world of finance, liquidity is the lifeblood of any market.
But what does it really mean?
🔹 Liquidity = the ability to convert an asset into cash quickly and without a significant loss in value.
This means: the higher the liquidity, the easier it is to buy and sell without sharp price fluctuations.
Examples:
💵 Cash = the highest form of liquidity.
🏠 Real estate = low liquidity. Selling it takes time and often with a discount.
In financial markets:
The BTC/USDT pair on Binance, for example, enjoys high liquidity.
Low-traded currencies = weak liquidity = higher risk.
Why does liquidity matter?
1. ✅ Reduces the spread between the buying and selling price.
2. ✅ Makes entering and exiting trades smoother.
3. ✅ Reduces abnormal price volatility.
📊 Smart traders do not just look at the trend, but always ask:
"How deep is this market?"
