#Liquidity101 Liquidity 101 (150 Words)

Liquidity in trading refers to how easily an asset can be bought or sold without significantly affecting its price. High liquidity means there's a large number of buyers and sellers, making trades faster and more stable. For example, major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) are highly liquid on big exchanges.

Low liquidity, on the other hand, means fewer participants in the market. This can lead to slippage—where your trade executes at a worse price than expected—and price volatility.

Liquidity is crucial for traders because it affects:

Execution speed

Price stability

Transaction costs

Factors that influence liquidity include trading volume, number of active traders, and exchange type (CEXs usually have more liquidity than DEXs).

In simple terms, more liquidity = smoother trading. Always check an asset’s liquidity before trading, especially in volatile or low-cap markets. It can save you from unexpected losses and delays.