#Liquidity101 Liquidity refers to how quickly and easily assets can be converted into cash without affecting their market price. In financial markets, high liquidity means there are many buyers and sellers, making it easier to trade assets. On the other hand, low liquidity can result in difficulty selling an asset or significant price changes when attempting to buy or sell. Liquidity is essential for efficient market functioning, enabling businesses and investors to manage cash flow, invest, and trade effectively.