#Liquidity101

Financial Liquidity Simply

Liquidity (Liquidity) is used in the world of finance and investment to indicate the ease of converting an asset into cash without a significant loss in value.

1. What is liquidity?

Liquidity means the ability to buy or sell an asset (such as stocks, currencies, real estate, or cryptocurrencies) quickly and at a price close to the current market price.

2. Simple examples:

• Cash is the highest form of liquidity – you can use it immediately.

• Gold: Its liquidity is high, but lower than cash because you need to sell a piece of gold first.

• Real estate: Its liquidity is low because selling a house can take weeks or months.

• Cryptocurrencies: Liquidity depends on trading volume – a currency like BTC or ETH has high liquidity, while smaller coins may find it difficult to sell at a good price.

Why is liquidity important?

• Market flexibility: Liquidity gives you the ability to enter and exit assets quickly.

• Greater security: Markets with high liquidity are usually less prone to manipulation or sharp crashes.

• Lower costs: When liquidity is high, the difference between the buying and selling price (spread) is small.

Liquidity in cryptocurrencies

• In the crypto world, liquidity depends on:

• The daily trading volume of the currency

• The number of exchanges that support the currency

• The depth of the order book

The more buyers and sellers there are, the greater the liquidity and the easier it is to execute your orders.