#Liquidity101 #Liquidity101: What It Means and Why It Matters

Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. In simple terms, high liquidity means there are many buyers and sellers, so trades happen quickly and at stable prices. Low liquidity, on the other hand, can lead to delays, larger spreads, and unpredictable price swings.

In crypto and stock markets, liquidity is crucial. It impacts how efficiently you can enter or exit positions. For example, Bitcoin has high liquidity, making it easier to trade at fair market value. In contrast, a small altcoin or low-volume stock may have fewer participants, making it harder to sell without taking a loss.

Liquidity is also influenced by trading volume, market depth, and order book activity. For traders and investors, high liquidity generally means lower risk and better price execution. Always check liquidity before trading—it's key to smart decision-making.