#Liquidity101
Liquidity 101! Let's break it down:
*What is liquidity?*
Liquidity refers to how easily you can buy or sell an asset without significantly affecting its price. Think of it like converting cash into another asset quickly and efficiently.
*Key aspects:*
1. *Market depth*: The amount of buy and sell orders at different price levels.
2. *Trading volume*: The amount of assets being traded.
3. *Order book*: A list of buy and sell orders.
*Importance:*
Liquidity matters because it affects:
1. *Price stability*: High liquidity = less price volatility.
2. *Trading ease*: Easy to buy/sell without large price swings.
3. *Market efficiency*: Reflects the true market value.