#Liquidity101 What is liquidity and why is it important?

When you buy or sell cryptocurrency — you directly encounter liquidity, even if you don't think about it.

🔍 Liquidity is the ability of an asset to be quickly bought or sold without significantly affecting the price.

Examples:

✅ High liquidity: BTC/USDT on Binance — trades happen quickly and at market price.

❌ Low liquidity: a rare token on DEX — an order may 'slip' and you will buy at a higher price than you wanted.

📉 Low liquidity:

• High spreads

• Significant 'slippage'

• Difficulties exiting a position

📈 High liquidity:

• Reliable prices

• Fast order execution

• Safer trading

💡 In DeFi, liquidity is provided by users through liquidity pools. In return, they receive a share of the fees, but they also bear risks (for example, impermanent loss).

🔁 Conclusion: if an asset 'moves' when trying to buy it — that’s a red flag. Always assess liquidity before a trade!